Fund Public Goods Research Articles

“I ESTABLISHED A CASH WAQF FOR WHAT?”: EMPIRICAL ANALYSIS OF RELATIONSHIP BETWEEN SERVICES AND CAPITAL

This study investigates the effects of cash waqf-financed services on capital levels in Rumelia from a long-term perspective by employing quantitative information obtained from cash waqf deeds. Specifically, it explores the determinants of capital levels, including religious services, financing of public goods, poor support, and family support. Regression analysis generated the primary method of this study to achieve these goals. The findings reveal that religious services and family support are the predominant functions financed by cash waqfs, while financing public goods and assistance to the poor are less common. The quantitative analysis suggests that the coefficients for former services are positive and insignificant, although the effect of financing public goods is negative and insignificant. However, poor support had a positive and significant effect on capital levels. Overall, this study's findings challenge the widely accepted notion in the literature that financing public goods and assistance to the poor are prevalent in cash waqfs in Rumelia. Keywords: The Ottoman Empire, Rumelia, Cash Waqfs, Capital, Services JEL Classification: N2, N25, N85, N95

When tainted money should fund public goods: fundraising professional and public moral preferences.

Philanthropy is essential to public goods such as education and research, arts and culture, and the provision of services to those in need. Providers of public goods commonly struggle with the dilemma of whether to accept donations from morally tainted donors. Ethicists also disagree on how to manage tainted donations. Forgoing such donations reduces opportunities for societal well-being and advancement; however, accepting them can damage institutional and individual reputations. Half of professional fundraisers have faced tainted donors, but only around a third of their institutions had relevant policies (n = 52). Here, we draw on two large samples of US laypeople (ns = 2,019; 2,566) and a unique sample of experts (professional fundraisers, n = 694) to provide empirical insights into various aspects of tainted donations that affect moral acceptability: the nature of the moral taint (criminal or morally ambiguous behavior), donation size, anonymity, and institution type. We find interesting patterns of convergence (rejecting criminal donations), divergence (professionals' aversion to large tainted donations), and indifference (marginal role of anonymity) across the samples. Laypeople also applied slightly higher standards to universities and museums than to charities. Our results provide evidence of how complex moral trade-offs are resolved differentially, and can thus motivate and inform policy development for institutions dealing with controversial donors.

Analyzing the Relationship Between Public Debt and Poverty Reduction in Developing Countries: An Empirical Study

Purpose: The goal of this current research is to investigate the link between public debt and poverty reduction in developing countries. The study aims to examine the influence of public debt on poverty reduction while considering other contributing factors such as economic growth, population, inflation, human development index, and institutional quality. Theoretical framework: The theoretical framework of this research on the impact of public debt on poverty reduction in developing countries is grounded in two key theories: Debt Overhang Theory and Fiscal Space and Poverty Reduction theories. The first theory posits that high levels of public debt can lead to negative consequences for economic growth and poverty reduction. The second theory emphasizes the importance of fiscal space in poverty reduction efforts. Fiscal space refers to the financial resources available for a government to fund public goods and services without jeopardizing debt sustainability. Method/design/approach: In this research, a panel data approach is utilized to investigate the correlation between public debt and poverty reduction in developing countries. The panel dataset encompasses a 21-year period, from 2000 to 2021, and includes data from 20 developing countries. Results and conclusion: The study shows that public debt has a significant and positive correlation with poverty, indicating that high levels of public debt can lead to an increase in poverty in developing countries. Research implications: Because high levels of public debt can lead to an increase in poverty in developing countries, countries need to exercise caution when taking on debt and prioritize debt sustainability to avoid negative effects on poverty levels. In contrast, economic growth and human development have a significant and negative correlation with poverty, suggesting that these factors can contribute to poverty reduction in developing countries. Originality/value: The analysis highlights the complex relationship between public debt and poverty reduction in developing countries. Although the results are mixed, they emphasize the need for policymakers to adopt a comprehensive approach to poverty reduction that addresses not only reducing public debt but also promoting economic growth, enhancing institutional quality, and addressing other poverty-contributing factors.

AUCTIONS FOR CHARITY: THE CURSE OF THE FAMILIAR

AbstractAuctions and raffles are commonly used to fund public goods. We run fundraising events in the field at the meetings of a well‐known service organization across the United States to examine the fundraising properties of five mechanisms: one that is common in the literature, two that are familiar to practitioners in the field, and two that are new. Consistent with a novel model assuming independent private attachments to the charity, we find large differences in the performance between the two most familiar formats, but these disparities are dwarfed by the differentials achieved using the new and less common formats.

Understanding the geography of affordable housing provided through land value capture: Evidence from England

Governments the world over routinely undertake Land Value Capture (LVC) to recover some (or all) of the uplift in land values arising from the right to develop in order to fund infrastructure and public goods. Instruments to exact LVC are diverse but are usually implemented independently. However, since 2011 England has been experimenting with a dual approach to LVC, applying both a tariff-style levy to fund local infrastructure (the Community Infrastructure Levy) and negotiated obligations, used primarily to fund affordable housing (Section 106 agreements). In this article we employ a difference-in-differences (DID) method to identify the interaction of these two instruments available to local planning authorities. We explore the question of whether the Community Infrastructure Levy ‘crowds out’ affordable housing secured through Section 106 planning agreements. In so doing we show that the interaction of these two approaches is heterogeneous across local authorities of different types. This raises questions for understanding the economic geography of development activity and the theory and practice of Land Value Capture.

СОВРЕМЕННАЯ ДОЛГОВАЯ ПРОБЛЕМА США В КОНТЕКСТЕ РЕГУЛИРОВАНИЯ СОЦИАЛЬНО-ЭКОНОМИЧЕСКОГО НЕРАВЕНСТВА

Global debt has risen dangerously since the early 2000s, but most governments and central banks are more supportive of investors, because they keep printing money and buying back financial assets to provide markets and economy with liquidity. In this regard, we can see increasing concern not only about the growing debt burden of the world economy, but also about the impact of this problem on the dynamics of economic inequality. The aim of the work is to analyse and clarify the relationships between public debt and economic inequality in the USA for the period of 1910–2018. This study concludes that the level of economic inequality is not directly related to the specific level of public debt and changes under the influence of other factors, such as taxes and government spending on combating poverty, financed by the new government debt. Modern financial policies lead to increased economic inequality in wealth, which is confirmed by the data for most countries. In many developed countries, there is a progressive taxation system that curbs the rising income inequality. However, in most of them, there are complex tax relief and deduction systems for long-term investors, the problem of offshore and tax avoidance remains unresolved, which creates great obstacles to solving the problem of the growing economic inequality. In the context of the galloping inflation of financial assets, the growth rate of labor income is guaranteed to be lower than the growth rate of investment income. In the recommendations, the author justifies the modern problem of the public debt growth. The main risk in addressing this problem in the context of economic inequality regulation is the risk of increasing intergenerational economic inequality. We see how the tax burden is being transferred to future generations, while modern taxpayers have better opportunities to improve their quality of life, accumulate adequate pension capital and generally live with a higher level of financing of public goods. All this may not be the case for future generations of taxpayers due to the likely exacerbation of the debt problem in the future, since they will either have to pay more taxes on their income, pay a high inflation tax, or go to reduce public spending and finance public goods to solve the “unsolvable debt problem”. In this regard, the main recommendations today are to make every possible effort to contain the growth of public debt to a rate no higher than the growth of the economy; to develop a system of fiscal regulation of investor wealth and investment income; to optimize inheritance taxes; and, of course, to continue solving the problem of tax avoidance and offshore.

Rent Seeking in Blockchain Governance: The Awkward Transition From Market Decision Making to Non-market Decision Making

Blockchains and applications built on blockchains are decentralised ecosystems that are nonetheless built by centralised firms. The typical launch and maturity of a blockchain ecosystem involves the transition from an entrepreneurial institutional arrangement characterised by market decisionmaking to a decentralised one characterised by non-market decisionmaking. This paper considers how to assess rentseeking in the context of blockchain governance. Rentseeking in blockchain implementations and ecosystems occurs when participants seek rewards or privileges in excess what would be considered a market contribution after a certain threshold of decentralisation. The paper considering two controversies in blockchain governance – the Zcash founders’ reward and the SushiSwap developer fund – which involved the intertwining of mechanisms to fund public goods with mechanisms to compensate founders for their entrepreneurial effort. The paper finds that the normative ideal of decentralisation in blockchain governance has a parallel function to the normative ideal of liberal governance in political systems.

How can Bill and Melinda Gates increase other people's donations to fund public goods?

We conducted a fundraising experiment with an international development nonprofit organization in which a matching grant offered by the Bill and Melinda Gates Foundation raised more funds than one from an anonymous donor. The effect is strongest for solicitees who previously gave to other BMGF-supported, poverty charities. With supporting evidence from two other fundraising experiments as well as a survey experiment, we argue this is consistent with a quality signal mechanism. Alternative mechanisms are discussed, and not ruled out. The results help inform theories about charitable giving decision-making, and provide guidance to organizations and large donors on how to overcome information asymmetries hindering fundraising.

Financing of Public Goods Through Taxation in a General Equilibrium Economy: Theory and Experimental Evidence

We compare general equilibrium economies in which building and maintenance of a depreciating public facility is financed either by anonymous voluntary contributions or by taxing agents on their income from private production. Agents start with an endowment of private goods and money, while the government starts with an endowment of public good and money. All private goods produced are tendered for sale in exchange for money in a sell-all market mechanism. Agents' proceeds from sale are taxed, and they individually allocate their private goods between current consumption and investment in production for the following period. The optimal levels of supply of the public good, and tax rate to sustain it over time, are defined and calculated for infinite and finite horizons. These equilibrium theoretical predications are compared to the outcomes of laboratory economies when (1) the starting public facility is either at or below the optimal level; and (2) the tax rate is either exogenously set at the optimal level, or at the median of rates proposed by individual agents. We find that the experimental economies sustain public goods at about 70-90 percent of the infinite horizon but considerably more than the finite horizon optimum. Payoffs (efficiency) is at 90 percent of the infinite horizon equilibrium level even when the rate of taxation is determined by voting. Starting conditions play only a minor role for outcomes of the economies, as efficiency and the stock of public good adjusts to about the same level irrespective of the starting level. These results contrast with rapid decline in provision of public goods under anonymous voluntary contributions, and point to the possibility that the social institution of government enforced taxation may have evolved to address the problem of under-production of public goods through anonymous voluntary contributions.

The Right and the Good: Taxing Rights, Value Creation, and the Rhetoric of International Taxation

The Right and the Good: Taxing Rights, Value Creation, and the Rhetoric of International Taxation

Providing Environmental Public Goods under the Common Agricultural Policy as a Cure for Market Failure

Purpose: In the reality of the marketplace, a situation often arises where an economic surplus (rent) achieved by agricultural producers is partly taken over by related non-agricultural sectors. In this sense the category of economic rent embraces market failures related to such factors as price flexibility, and thus represents an effect of the misallocation of resources in the agricultural sector. The question therefore arises of whether there exists a developmental model of agriculture in which such market failures would be reduced. Apparently the only coherent response to this need is action taken under the paradigm of sustainable agriculture. This type of model for the sector’s functioning is supported by the objectives of the European Union’s Common Agricultural Policy (CAP), including through support for the supply of public goods in rural areas. Design / Methodology / Approach: To verify the hypothesis, a panel regression analysis was performed on three sets: the EU-15 countries and the EU-12 countries. The analysis covered two hitherto accomplished CAP programming periods: 2004-2006 and 2007-2013. Findings: Increase in the level of payments for public goods, as a percentage of total subsidies to agriculture, leads on average to a reduction in the drainage of economic rents through prices. It was also found that the financing of public goods under the CAP is more effective in reducing market failures in the EU-15 countries than in the EU-12. Practical Implications: This article addresses the question of whether CAP payments for public goods are a desirable systemic solution serving to reduce market failures. It is hypothesised that the financing of activity relating to the supply of public goods mitigates the “market treadmill”, since it reduces the unexpected outflows of economic surplus away from farms, caused by agricultural prices.

Management of tax system adopting to European standards

Ukraine is a social and legal state and seeks to become part of the European community. Therefore, the tax system needs to be reorganized regarding the level of financing of public goods, which will ensure the formation of financial resources sufficient for the fulfillment of the assigned functions of the state and guaranteeing citizens a sufficient standard of living. All this requires harmonization of the legal norms of Ukraine in accordance with the requirements of the European Union. Formation of tax policy in post-socialist countries has features related to the restructuring of the socio-economic system and redistributive mechanisms in the context of the formation and establishment of market relations. The aim of the work is to generalize theoretical approaches and develop practical recommendations for management of tax system according to European standards. The object of the study is the process of managing the tax system in Ukraine. The subject of the study is theoretical, methodological and practical principles aimed at managing the tax system of European standards. To solve the problems set in the work, such general scientific methods and research methods were used as analysis, economic-statistical method, synthesis, graphical and tabular method, historical methods of induction and deduction, method of theoretical generalization, system method. The conceptual approaches to the development of the tax system are proposed. The determinants of tax policy formation are determined. There are four main time stages of development of interstate cooperation in the tax area, which correspond to the waves of globalization of the world economy.

How Does Land Policy Affect the Size Distribution of Chinese Cities?

This paper studies the evolution of city population and the land use policy in China. We show that the population distribution of cities in China tends to cluster around 2-8 million people, and the distribution has become more clustered in recent years. Using a general equilibrium urban model, we derive a link between the salient data features and the unique institutional settings in China, including (i) the financing of public goods through land revenue and (ii) the discretion of regional governments over land allocation under constraints from the central government. Theoretically, we show that the first institutional feature causes higher elasticity in city population growth with respect to land supply. The empirical results reveal that commercial land in China has a significant positive impact on population, and the impact is amplified by the agglomeration effect. Residential land, on the other hand, has a negative effect on population in cities with stronger agglomeration. We also provide evidence that, in the absence of land allocation constraints from the central government, regional governments would allocate more land to commercial use and thus population would grow faster in larger cities.

Legitimate authorities and rational taxpayers: An investigation of voluntary compliance and method effects in a survey experiment of income tax evasion

In order to collect the revenue necessary to fund public goods, a state is often required to both deter tax evasion and encourage voluntary tax compliance on the part of its citizens. While most prior research has focused on explaining tax evasion with standard economic model parameters, there has been growing interest in identifying the determinants of voluntary compliance. We build on this work by proposing a legitimacy-based model of tax compliance that accounts for why some citizens voluntarily comply with their tax obligations and others do not. To test our model, we develop and administer a survey experiment of income tax evasion to a large random sample of undergraduate students. We also investigate the extent to which design-based method effects bias our results, such as order effects, complexity effects, and missing information effects. Substantively, results strongly support the standard economic model of deterrence and weakly support the legitimacy-based model of voluntary compliance. Methodologically, we find no evidence of order effects, weak evidence of complexity effects, and suggestive evidence of missing information effects.

Financing of public goods through taxation in a general equilibrium economy: Experimental evidence

We use a laboratory experiment to compare general equilibrium economies in which agents individually allocate their private goods among consumption, investment in production, and replenishing or refurbishing a depreciating public facility in a dynamic game with long-term investment opportunities. The public facility is financed either by voluntary anonymous contributions (VAC) or taxes. We find that rates of taxation chosen by majority vote remain at an intermediate level close to the finite-horizon optimum, and the experimental economies sustain public goods at levels between the finite- and infinite-horizon optima. This contrasts with a rapid decline of public goods under VAC. Both the payoff efficiency and production of private goods are higher when taxes are set endogenously instead of being fixed at the infinite-horizon optimum level externally. When taxes are adjusted to the respective finite-horizon optimum each period, production levels and efficiency remain as high as in the voting treatments at least in the latter half of the sessions. When subjects choose between VAC and taxation, 23 out of 24 majority votes favor taxation, demonstrating a clear preference for enforceable taxes to finance public goods in this setting.

Tax Justice & Poverty. Short Version of the Final Synthesis Report

Short Synthesis Report on the findings of a three-country research project, conducted in Germany, with a focus on Bavaria, Kenya and Zambia. Based on instruments of quantitative and qualitative social research, its focus is on equity and justice as well as the link between tax policies, law and administration and its potential to alleviate poverty and diminish inequality, e.g. via redistribution and the financing of public goods and services. It contains an empirical, an ethical and a recommendation part, the ethical framework being Catholic Social Teaching.

Innovation Policy and the Economy: Introduction to Volume 18

Innovation Policy and the Economy: Introduction to Volume 18

How Can Bill and Melinda Gates Increase Other People's Donations to Fund Public Goods?

We develop a simple theory which formally describes how charities can resolve the information asymmetry problems faced by small donors by working with large donors to generate quality signals. To test the model, we conducted two large-scale natural field experiments. In the first experiment, a charity focusing on poverty reduction solicited donations from prior donors and either announced a matching grant from the Bill and Melinda Gates Foundation, or made no mention of a match. In the second field experiment, the same charity sent direct mail solicitations to individuals who had not previously donated to the charity, and tested whether naming the Bill and Melinda Gates Foundation as the matching donor was more effective than not identifying the name of the matching donor. The first experiment demonstrates that the matching grant condition generates more and larger donations relative to no match. The second experiment shows that providing a credible quality signal by identifying the matching donor generates even more and larger donations than not naming the matching donor. Importantly, the treatment effects persist long after the matching period, and the quality signal is quite heterogeneous--the Gates' effect is much larger for prospective donors who had a record of giving to poverty-oriented charities. These two pieces of evidence support our model of quality signals as a key mechanism through which matching gifts inspire donors to give.

Legitimate Authorities and Rational Taxpayers: An Investigation of Voluntary Compliance and Method Effects in a Survey Experiment of Income Tax Evasion

In order to collect the revenue necessary to fund public goods, states are often required to both deter tax evasion and encourage voluntary tax compliance on the part of their citizens. While most prior research has focused on explaining tax evasion with standard economic model parameters, there has been growing interest in identifying the determinants of voluntary compliance. We build on this work by proposing a legitimacy-based model of tax compliance that accounts for why some citizens voluntarily comply with their tax obligations and others do not. To test our model, we develop and administer a survey experiment of income tax evasion to a large random sample of undergraduate students. We also investigate the extent to which design-based method effects bias our results, such as order effects, complexity effects, and missing information effects. Substantively, results strongly support the standard economic model of deterrence and weakly support the legitimacy-based model of voluntary compliance. Methodologically, we find no evidence of order effects, weak evidence of complexity effects, and suggestive evidence of missing information effects.

Directions for International Tax Reform, Testimony before the U.S. Senate Committee on Finance Hearing on International Tax Reform

Testimony before the U.S. Senate Committee on Finance Hearing on International Tax Reform, October 3, 2017. Objectives for Tax Reform: Tax reform should maintain or enhance our tax system’s current level of progressivity in distributing tax burdens and benefits. The most significant social welfare fact today is that the income of middle and lower income workers has stagnated in recent decades and a disproportionate share of income growth has accrued to those with highest incomes — the top 1%. While we have recovered from the recession and middle and lower income workers have made some gains, the disparity between high-income and middle- and lower-income has grown substantially and income mobility is more constrained than for prior generations. The taxation of cross-border income of U.S. MNCs should be analyzed under the same fairness standards that apply to any other income. In particular, as I discuss later in this testimony, a reduced “holiday” tax rate on U.S. MNCs’ pre-effective date offshore earnings will overwhelmingly benefit high-income Americans (and foreigners) and is not justified on any policy ground. Its sole purpose is to provide a one-time source of revenue that disguises the future revenue loss from shifting to a weak territorial system. Tax reform should be revenue neutral or increase net revenues. The central importance of our tax system to national competitiveness and growth is to fund public goods, such as education, basic research, infrastructure, healthcare and income security transfers, and national defense. These government services and capital expenditures support a high standard of living, income security, and physical security for all Americans. It is the job of the tax system to raise the necessary revenue to fund needed public expenditure and not add trillions to the national debt as proposed in the Senate Budget proposal and the GOP Tax Reform Plan. Objectives for International Tax Reform: International tax reform should maintain or increase, not reduce, the aggregate tax on U.S. MNCs’ foreign income. There is no policy justification to advantage international business income of multinational corporations (MNCs) beyond allowing a credit for foreign income taxes. Moreover, evidence does not support claims that U.S. MNCs are overtaxed or are non-competitive as a consequence of U.S. tax rules. The U.S. Treasury Department found that the average tax paid by U.S. companies from 2007–2011 on their book earnings plus foreign dividends was 22%. The most recent publicly available Statistics of Income data for 2012 shows that foreign subsidiaries of U.S. MNCs in the aggregate paid an average foreign tax rate of 12%. Foreign income should be taxed currently or, if that is not politically feasible, under a per country minimum tax regime that is effective in discouraging tax avoidance through transfer pricing and related techniques that shift and indirectly erode the U.S. tax base. International tax reform should assure that the tax rules for foreign multinational companies on U.S. business activity does not provide them an advantage in relation to U.S. companies. Tax reform should undertake a fundamental review of U.S. source taxation of cross-border activity having a U.S. destination including remote digital sales into the United States. In addition, tax reform should strengthen U.S. corporate residence and earnings stripping rules. Taxation of international portfolio income should be fundamentally re-examined. Under current rules, there are U.S. tax advantages for portfolio investment by U.S. investors in foreign stock over domestic stock. Similarly, foreign pension funds that benefit principally foreign workers receive exemptions and reliefs from U.S. tax that are not reciprocated by foreign countries on U.S. pension funds benefitting U.S. workers. A fundamental tax reform effort should re-examine from scratch the U.S. rules for taxing cross-border portfolio income, however, the treatment of portfolio income is a subject for development on another occasion.