Browsing by Author "Claus, Iris"

Now showing 1 - 2 of 2

Open Access
The Elasticity of Taxable Income in New Zealand
(Te Herenga Waka—Victoria University of Wellington, 2012) Claus, Iris; Creedy, John; Teng, Josh
This paper reports estimates of the elasticity of taxable income with respect to the net-of-tax rate for New Zealand taxpayers. The relative stability of the New Zealand personal income tax system, in terms of marginal rates, thresholds and the tax base, provides helpful conditions for deriving these estimates. The elasticity of taxable income was estimated to be substantially higher for the highest income groups. Changes in the timing of income flows for the higher income recipients were found to be an important response to the announcement of a new higher-rate bracket. The marginal welfare costs of personal income taxation were consistent across years, being relatively small for all but the higher tax brackets. For the top marginal rate bracket of 39 per cent, the welfare cost of raising an extra dollar of tax revenue was estimated to be well in excess of a dollar.
Restricted
Financial Intermediation and Asymmetric Information in a Small Open Economy
(Te Herenga Waka—Victoria University of Wellington, 2005) Claus, Iris
The purpose of this thesis is to assess the effects of credit markets on economic activity in a small open economy with a floating exchange rate. The thesis comprises three distinct papers, each of which addresses some aspect of the theme "Financial intermediation and asymmetric information in a small open economy". Asymmetric information in credit markets arises because borrowers generally know more about their investment projects than lenders. Financial intermediaries can help overcome this imperfect information, leading to a more efficient allocation of resources and hence faster economic growth. Asymmetric information between borrowers (investors) and lenders (savers) affects the transmission mechanism of shocks in two ways. First, a shock to the economy can influence financial intermediaries' willingness to provide loans. This channel is referred to as the bank lending channel. The second channel is the balance sheet channel. It focuses on the potential impact of shocks on firms' financial positions and arises from agency costs. Agency costs in credit markets occur whenever lenders delegate control over resources to borrowers, leading to adverse selection, moral hazard and monitoring costs because of the inability to monitor borrowers or share in borrowers' information costlessly. This thesis analyses the effects of the bank lending and balance sheet channels in a dynamic general equilibrium model of a small open economy that is calibrated for New Zealand. The analysis shows that the effects of the bank lending channel are small. However, the impact of the balance sheet channel and agency costs is much larger. A decline in the degree of information asymmetry would lower agency costs and the cost of external financing, leading to an increase in the long-run level of steady state capital, investment and output. Moreover, asymmetric information and agency costs have important effects on the business cycle. The findings suggest that macroeconomic models that disregard information asymmetry between borrowers and lenders are an incomplete description of the economy. They also underline the importance of a well-functioning financial system to reduce information asymmetry and agency costs in credit markets.