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Is knowledge the centrepiece of economic growth? Are enormous differences in wealth, health and well-being across nations, developed and developing alike, driven by differences in educational achievement?

Professor Woessmann addresses these questions in his recent thought-provoking book „The Knowledge Capital of Nations: Education and the Economics of Growth“ (coauthored with Prof. Eric A. Hanushek). Professors Woessmann and Hanushek, world experts on research with international test score and educational data, convincingly demonstrate that conventional measures of schooling miss a crucial part of how skills translate into development and make a powerful argument that learning and cognitive skills, after all, might be the key to long-run prosperity.

For registration please fill out a short form at http://bit.ly/idea_capital or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it..

You can also find this event on our facebook, or follow all other IDEA activities on our facebook page  http://www.fb.com/ideacerge/.This lecture is essential for anyone interested in differences in education, growth and development across countries. 

Join us for the only public seminar led by OECD representatives following the official presentation of the 2016 OECD Survey on the Czech Republic. 

AGENDA:

Introduction

Andreas Wörgötter, Head of Division at the OECD Economics Department
The macroeconomic policy environment between unconventional exchange rate policy and a no fiscal framework.

Innovation policy and productivity growth

Falilou Fall, Head of Czech Republic Desk
Over the past two decades, the income level of the Czech Republic has converged considerably towards the OECD average. However, since the 2008 global crisis, the convergence process has stalled. Shortfalls in labour productivity have developed and are mainly structural. The productivity growth decline stems from lower productivity growth in all sectors but the financial services and has  become more severe since the crisis. Also, the high number of small enterprises, which have lower productivity than large firms, and the lower productivity of Czech firms without foreign ownership compared to those with foreign ownership contribute to the productivity patterns. Two types of policies are developed in this chapter to foster productivity: the first one is about strengthening R&D and innovation policies and the second one is about improving market framework condition.

Public sector efficiency

Christine Lewis, Czech Republic Desk
Spending on the public administration itself is relatively low but so are indicators of its performance. General challenges across levels of government include wastage in public procurement, insufficient management of the investment cycle and high levels of staff turnover in the public service. The structure of local government, which includes over 6 200 municipalities, exacerbates these challenges by complicating co-ordination and stretching capacity even further. Existing forms of co-operation have not adequately overcome the challenges for small municipalities in efficiently delivering high quality public services. At the same time, Czech local governments are heavily dependent on grants and transfers from the central government. This chapter looks at ways of improving the system of administration and realising greater benefits of decentralisation.

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More information on www.oecd.org.

Dissertation Committee:
Jan Hanousek (chair)
Randall K. Filer
Peter Katuščák
Sergey Slobodyan

Abstract:

This dissertation analyzes two presently widely discussed topics in Public Finance: relationship between the shadow economy and tax policy, and the effect of financial transaction taxes on the functioning of financial markets.

The first chapter describes presently used estimators of the size of the shadow economy, with a focus on microeconomic estimators. It illustrates problems with assumptions that a vast majority of recent studies use to identify underreporting (mainly the comparison of employed and self-employed) using data from four transition economies as an example. It shows that the most common assumption, that self-employed evade whereas employees do not is probably too strict in less compliant economies, where even employees have opportunities to evade through e.g. under-the-table wages or by moonlighting at unreported jobs.

The second chapter develops an estimator of unreported income that relaxes some of these strict assumptions. Assuming only that tax-evading households have a higher consumption-income gap than non-evaders in surveys, an endogenous switching model with unknown sample separation enables the estimation of both the probability of hiding income and the expected amount of unreported income for each household. Using data from Czech and Slovak household budget surveys, we find the size of the shadow economy to be substantially larger than estimated using other techniques. These results are robust under a number of alternative specifications. Furthermore, we show that since the share of underreported income decreases with income level, true income inequality in these countries is lower than suggested by the reported income.

In the third chapter we analyze the tax evasion response to the introduction of the flat tax in several transition economies. Using the estimator from the previous chapter, we show that in majority of studied countries there was no discernible effect of the flat tax reform on the size of the shadow economy. We argue that this finding is consistent with the tax morale story, as satisfaction with public services and with countries' development in general declined in these countries.

The fourth chapter focuses on financial transaction taxes (FTTs), which have returned to spotlight since the recent economic crisis as a possible means to offset negative risk externalities. However, up-to-date academic research does not provide sufficient insights into the effects of transaction taxes on financial markets, as the literature has heretofore been focused too narrowly on Gaussian variance as a measure of volatility. In this paper, we argue that it is imperative to understand the relationship between price jumps, Gaussian variance, and FTTs. While Gaussian variance is not necessarily a problem in itself, the non-normality of return distribution caused by price jumps affects not only the performance of many risk-hedging algorithms but directly influences the frequency of catastrophic market events. To study the relationship between FTTs and price jumps, we use an agent-based model of financial markets. Its results show that the relationship is intricate, as the volatility as measured by the standard deviation of prices may rise with increasing tax rate, while, at the same time, the measure of price jumps goes down. This result implies that regulators may face a trade-off between overall variance and price jumps when designing optimal tax.

Full Text: “Essays on Public Finance” by Tomáš Lichard