Miguel-Angel Lopez-Garcia

The origin principle and the welfare gains from indirect tax harmonization

This paper establishes a parallelism between indirect tax harmonization when taxes are levied according to the destination principle and its counterpart when taxes are imposed on an origin basis. Using a simple two-country model of international trade it is argued that, under “normal” circumstances, indirect tax harmonization under the origin principle, considered as a movement of domestic taxes toward an appropriately designed average tax structure, is potentially Pareto improving. It is also shown that if the initial position is a Nash equilibrium, there are “exceptional” situations under which the above-mentioned reform may generate an actual Pareto improvement, so that both countries improve their welfare without any need for a compensating international transfer.

On welfare and revenue effects of indirect tax harmonization

Abstract This paper discusses whether some of the propositions concerning indirect tax harmonization that have been derived in models where tax revenue is returned to the consumers as a lump-sum transfer can also be extended to the more relevant situations in which governments levy taxes to finance the purchase of goods and services. Using a two-country model, it is argued that a family of indirect tax harmonization policies, expressed as a multilateral movement of domestic taxes towards an appropriately designed “average” tax structure, can be characterized as potentially welfare improving.

A projection model of the contributory pension expenditure of the spanish social security system: 2004-2050*

The need for long-term fiscal projections is self evident. Of these projections, pension expenditure is one of the most important since firstly it represents a large share of total expenditure, and secondly because of the positive correlation between this variable and demographic ageing. In this paper, we develop a model to project contributory pension expenditures in the Spanish Social Security System disaggregating the results by pension category, social security regime and sex. The most salient of the results obtained is the expected steady growth of total expenditure in contributory pensions. This would lie around 15% of GDP around 2045 compared to its initial level of barely 8% even though the baseline scenario incorporates a substantial recovery of employment and female participation rates. By pension categories, retirement pensions are those that determine the tendency of total expenditure evolution. Interesting conclusions can also be extracted from the analysis by sex. For instance, even accounting for an increase in female retirement pensions due to their higher participation, the corresponding increase in widow male pensions implies a higher total increase of the total number of contributory pensions accruing to men.

Optimal education and pensions in an endogenous growth model

In OLG economies with life-cycle saving and exogenous growth, competitive equilibria in general fail to achieve optimality because individuals accumulate amounts of physical capital that differ from the one that maximizes welfare along a balanced growth path (the Golden Rule). With human capital, a second potential source of departure from optimality arises, related to education decisions. We propose to recover the Golden Rule of physical and also human capital accumulation. We characterize the optimal policy to decentralize the Golden Rule balanced growth path when there are no constraints for individuals to finance their education investments, and show that it involves education taxes. Also, when the government subsidizes the repayment of education loans, optimal pensions are positive.

Public debt, voluntary intergenerational transfers and overlapping generations

Abstract This paper deals with the characterization of overlapping generations models with voluntary intergenerational transfers when altruism is one-sided. It is argued that the qualitative conclusions derived about debt neutrality do not depend on the way the intergenerational concern is modelled. With operative bequests (gifts), the steady-state interest rate is greater (less) than the population growth rate regardless of whether individuals have a concern about a representative descendants (ancestors) utility or the total welfare enjoyed by all their children (parents). When the criterion of total utility of the ancestors is adopted, their utility must not be discounted but compounded, since otherwise the model has no significant solution, although there must be effective discounting of a representative ancestors utility.

On debt neutrality in life-cycle models

Abstract A parallelism is established between pure life-cycle models and those in which altruism is one-sided in the discussion of the public debt neutrality. It is argued that when indiduals behave as pure life cyclers, the coercive transfers necessary to offset the effects of the debt have the same nature, and take place under the same conditions, as the voluntary intrafamily bequests and gifts which constitute the usual basis for the ‘Ricardian equivalence theorem’.

Public debt and demographic growth in an overlapping generations model

Abstract The comparative dynamics of changes in the rate of population growth are discussed in an overlapping generations economy where there is public debt. The focus is on the effects of such variations on capital accumulation, factor returns and welfare of individuals living in steady states.

On The Dynamic Efficiency Of Balanced Growth Paths In An Endogenous Growth Setting

In overlapping-generations economies with life-cycle saving and exogenous growth, the laissez-faire equilibrium balanced growth path fails in general to achieve optimality, but is dynamically efficient if the marginal product of physical capital is greater than the growth rate of the economy. In this paper, we accommodate the concept of dynamic (in)efficiency in an overlapping-generations economy with endogenous growth due to human capital accumulation. We show that the condition that the marginal product of physical capital is larger than the growth rate of the economy is necessary but no longer sufficient for the dynamic efficiency of the laissez-faire equilibrium balanced growth path.