News Archive

In this policy report, Hernán D. Seoane (EconPol Europe, Universidad Carlos III de Madrid) analyzes one aspect of the sovereign-bank nexus: the feedback effects between banks and sovereigns derived from the holdings of sovereign debt in domestic banks. He examines how this relationship evolved during the European debt crisis and how it responded to the implementation of ECB monetary policy based on Open Market Operations and Marginal Lending Facilities.

This working paper, from António Afonso, João Tovar Jalles and Ana Venâncio, evaluates the effects of structural tax reforms on government spending efficiency in a sample of OECD economies over the period 2007-2016. Increases in tax rates result in falling public efficiency, with the negative effect found to be more significant for increases in personal income tax and value added tax. In times of economic expansion, increasing the corporate income tax base and reducing personal income tax rates were found to have a positive impact on public sector efficiency.

While tax administrations have made considerable progress in fighting tax evasion, it remains a seemingly inextricable part of our world. Exploiting unique datasets covering over 28,000 tax evaders in the Netherlands, Wouter Leenders, Arjan Lejour, Simon Rabaté and Maarten van’t Riet investigate the distribution of tax evasion and its implications for the measurement of wealth inequality. They show that the distributional pattern of tax evasion depends on the type of tax evasion, e.g. it depends on the offshore country of choice.

To shed light on the question of whether green consumerism is beneficial to the environment and the economy, Stefan Ambec and Philippe De Donder study the political economy of environmental regulations in a model with neutral and green consumers where the latter derive some warm glow from buying a good of higher environmental quality produced by a profit-maximizing monopoly, while the good bought by neutral consumers is provided by a competitive fringe.

The border adjustment mechanism proposed by the European Commission is designed to reduce imported CO2 emissions; an attractive initiative on paper but whose implementation is a real headache as it conflicts with the trade negotiations conducted by the same Commission. Stefan Ambec and Claude Crampes (EconPol Europe and Toulouse School of Economics) examine the plans and consider the solutions.