Encouragement and discouragement. Essays on taxation and government expenditure

Tuomas Kosonen

No P57, Research Reports from VATT Institute for Economic Research

Abstract: This thesis consists of an introduction to a topic of optimal use of taxes and government expenditure and three chapters analyzing these themes more in depth. Chapter 2 analyses to what extent a given amount of subsidies affects the labour supply of parents. Municipal supplement to the Finnish home care allowance provides exogenous variation to labour supply decision of a parent. This kind of subsidy that is tied to staying at home instead of working is found to have fairly large effect on labour supply decisions of parents. Chapter 3 studies theoretically when it is optimal to provide publicly private goods. In the set up of the model government sets income taxes optimally and provides a private good, if it is beneficial to do so. The analysis results in an optimal provision rule according to which the good should be provided when it lowers the participation threshold into labour force. Chapter 4 investigates what happened to prices and demand when hairdressers' value added tax was cut in Finland from 22 per cent to 8 per cent. The pass-through to prices was about half of the full pass-through and no clear indication of increased demand for the services or better employment situation in the sector is found.

Keywords: Public economics; optimal taxes; government expenditure; labour supply; VAT; julkistaloustiede; optimaaliset verot; julkinen tarjonta; työn tarjonta; arvonlisävero; Labour market; Työmarkkinat; Taxation; Verotus; Taxation and Social Transfers; Julkisen talouden rahoitus ja tulonsiirrot (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (3)

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