Student Number: 109031116 Program Title: MSc Finance Module Title: Public Finance What are the likely impacts of an increase in the rate of the personal income tax upon the supply of work effort; personal saving and risk taking? What empirical evidence exists to support your answer? Introduction The main purpose of taxation is to fund public sector activities and affect the economy. The design of an optimal personal income tax system is dependent upon the how well the responses by individuals are known. Tax changes impact government revenue; as a result government is particularly keen on assessing the likely impact of a change.
Expanding on the benefit of the economy, he suggests that the increase in total earning capacity of the individual owner of Penn station is a better economic investment than the retention of less profitable, albeit more historical, landmarks in the community (Leff, 1). However, in this case specifically, it is important to note that the court ruled
However, in the long run these will have an effect on unemployment that will rise up and getting even worse. Moreover, most people are unlikely to be happy to accept higher taxes as it reduces disposable income and the level of consumption. A reduction of government spending may result in less people will support the government. Demand side policies will bring down the price level (reduce inflation), but they will result in lower national output and rise in unemployment. Therefore, government could use supply side policies to deal with the unemployment situation such as in interventionist supply-side policies will increase the levels of human capital of an economy by support education and training institutions with subsidies or tax benefits and for market-based supply-side policies will reduce trade union power.
Therefore human capital can drive technological progress through increasing the productivity of other factor inputs (Jones, 1998). However some argue that this relationship is not necessarily unidirectional. An argument can be made for growth causing human capital development as a result of growth in incomes of households, part of which is invested in education of children or by firms having more resources to provide on job training which improves the skills and competencies of the individuals. Others like (Al-Yousif, 2008) found in their study using empirical data in gulf countries that the relationship to be
Therefore, increasing the income level is the main concern of public policies. Until the endogenous growth theories, the traditional neoclassic approach - that underlined that the macroeconomic policies of the government are not effective on the economic growth - dominated the growth literature. On the contrary, the endogenous growth models take government expenditures in health, education, and social security and even in defense areas into account while modeling the growth of countries. However, the endogenous growth models have focused on the role of human capital as a key driver of economic growth which directs the public expenditures to invest in the human capital stock. The combination of the expenditures on human capital also matters in the endogenous growth models that there are important and direct relations between the government expenditures like education, health, social protection and social security and economic growth.
Postive Externalities. Positive externalities are the benefits resulting from an economic activity that are enjoyed or a crew to third parties not the buyers, not sellers but third parties. Next, markets like education and healthcare generate positive externalities and the problem is that if we leave things to the mechanism, the forces of demand and supply we wont get enough of these goods thats where the market failure is. Other than that, market forces will only generates so much of these good when a larger level of an output would be good for society and government have to correct that. Growth, first of all it has a downwards-sloping marginal private benefits curve.
The main target of an administrative reform is to produce improvement and advancement at a public sector, which is the society (Newman, 2002). In a similar manner, there might be some impacts which are negative in terms of economical growth. The developmental state theory does produce an increase in the economic growth, but its limitations can lead towards negative impacts such as inequality and social injustice (Park, 1979). Literature Review Adrian Left which has mentioned that the factor of developmental states that separates them from others, this specific characteristic is that their political aim and their institutional structures, they are being developmentally managed, and relatively their developmental objectives are being positioned and managed politically (Leftwich, 2000). Leftwhich further states and cites that the main purposes of these states,
They contend that in order for a host to take advantage of the positive externalities, thereby translating into higher growth, it must possess a minimum stock of human capital. At the same time, Durham (2004) suggests that hosts require developed financial markets for experiencing higher growth rates due to FDI. On the whole, the effects of FDI on economic growth appear ambiguous. But before further exploration, there is need to establish the causality between FDI and GDP growth. Causality: Does FDI affect growth?
They , as a result, would be more eager to learn and to enhance their capabilities. Conflicting purposes : With economic growth , some countries face the dominance of wealthy parts of the society that eventually affect how political parties would distribute revenue. • Pakistan has the world’s second-largest out-of-school population. This could be explained by the focus of politicians on facilitating tax evasion by the wealthy rather than enhancing learning opportunities for the poor. This thinking was adopted by not only one but successive governments which lead to low productivity growth of 3.09% for the period 2011-2020 ( forecasted) Education as a mean not an end : Following economic growth, governments recognize the
For example the Philippine peso to US dollar would matter in this way- if the prices of dollars go up, Americans would invest in the Philippines because their money can do more investments. Or in the case of smaller exchange rates, it can mean getting cheaper labor but is also a ground for exploitation. The status of either being developed, developing and underdeveloped becomes an issue. While the Philippines as developing economy is certainly good for electronics market, however a country with a bad economy is where those gadget wizards would avoid as much as