By Peter M. Jackson (eds.)
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Extra resources for Current Issues in Public Sector Economics
Households can also be disaggregated according to income, age, occupation, etc. Disaggregation, which is a feature of the general equilibrium models, gives greater insight into how different sectors of the economy are affected by tax changes. The demand effects of taxes vary between income groups. Thus, a model which distinguishes between a greater number of income groups provides greater understanding of the differential impact of taxes. A similar argument applies to portfolio composition which also varies across income groups.
Second, labour supply is much more complex than the simple model outlined above suggests. g. effort, morale, willingness to take responsibility, and investment in training and human capital. Furthermore, labour supply studies gene rally do not include the behaviour of the self-employed. Finally, there are wide confidence intervals around the point estimates for E. These qualifications severely constrain the utility of Browning and Johnson's conclusions for policy purposes. More generally the optimal tax literature and normative public finance have to address themselves to some of the more fundamental criticisms of the standard neoclassical model upon which their analysis is predicted.
Once the constitution is chosen fiscal decisions are made within the political process defined by the constitution. The constitution helps to constrain the political processes. Buchanan's early work has spawned a new school of thought within economics and has helped to forge some links between economic and political science. Public ·choice and the new political economy have developed alongside one another; though political economy is wider than public choice and incorporates the insights of social choice theory and game theory.
Current Issues in Public Sector Economics by Peter M. Jackson (eds.)