Empirical essays on public economics
Linares-Garcia, Carlos Alberto
Doctor of Philosophy
This dissertation consists of three empirical essays on public economics. The first essay improves upon previous empirical work on the potential asymmetry of the effect of federal grants on state-local public spending---the flypaper effect. An empirical model of state and local government spending is estimated using a new U.S. database which allows for the distinction between matching and non-matching federal funds, a critical factor in enhancing the results of previous work. I find that the estimated coefficients indicate a replacement type of asymmetry, although the symmetry hypothesis cannot be rejected on statistical grounds. The second essay examines the net incidence on different income groups of taxes and in- kind benefits of the Mexican Social Security health system, as well as the impact of recent reforms and of proposed plans. The results suggest a strongly progressive distributive structure for this system: Low-income individuals visit SS clinics more frequently and place a higher value on SS services relative to high-income individuals. The estimated demand model indicates that the opting-out and the frequency of use decisions are very sensitive to income and to the implicit prices of both public and private providers. Simulations suggest that the quality of SS clinics can be improved by introducing user fees or by offering vouchers to encourage the use of private facilities, although these policies may be highly regressive. In the third essay I study the equity and social welfare aspects of the structure of consumption taxes in Mexico. The decomposition of the Gini inequality index by expenditure categories and the conditions of welfare dominance developed by Yitzhaki are applied to consumption data in order to identify tax/subsidy policy changes that would increase social welfare, holding public revenues constant. The substitution of expenditure-elastic products for utilities under the zero VAT status and a greater reliance on excise taxes on gasoline and telephone are recommended.