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How to save the state budget and correct the shortcomings in revenue taxation? Modelling the impact of changes to the personal (employee) income tax
Prokop, D. ; Kalíšková, Klára ; Šoltés, Michal ; Münich, Daniel ; Ostrý, M.
The structural deficit of the state budget is partly made up of a shortfall in tax revenues of about CZK 150 billion from 2020 onwards. In order to stabilize public finances, in addition to spending reforms, the maximum of these tax losses must be recovered. However, revenue can be strengthened also in other ways than by taxing employees. An estimated CZK 70 to 115 billion can be raised through other types of taxes. The proposed changes to the personal income tax (PIT) must therefore balance the expected collection from other sources and respond to other specificities of the income tax set-up in the Czech Republic. These include, among others, the small progression and the existence of a number of discounts that cannot be fully used by people with lower incomes. This leads to a relatively high burden on low-income employees with limited collection of the PTI.
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Russia’s imperial war and the need for assistance to Ukraine during and after the war
Švejnar, Jan
In this essay, I use a historical perspective on Russia’s and Soviet Union’s imperial ambitions to examine Putin’s invasion of Ukraine and the need for the West to assist Ukraine decisively during and after the War. I emphasize that the part played by the countries of Central-East Europe in western response has been critical, as is and may in the future be, in a different way, the part played by China. Western sanctions have not been very effective as Europe has continued importing Russian oil and gas and most western firms have not left Russia. At the global level, Putin’s invasion of Ukraine also pretty much ensures that no country will ever give up its nuclear weapons in return for security guarantees by the Great Powers.
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Analysis of the 2024 state budget expenditure in light of the 2019 pre-crisis year
Janský, Petr ; Kolář, Daniel
Our analysis compares the 2024 state budget proposal approved by the government with 2019 state budget results. The interim period includes two major events with a number of significant economic impacts - the coronavirus and Russia’s aggression in Ukraine. We compare the percentage increases in key state budget expenditures with the 40.6% increase in prices and the 33.9% increase in nominal gross domestic product (GDP) over the same period, 2019-2024. Comparison that takes inflation into account is indicative of the change in the real value of spending, while comparison accounting for GDP growth shows the change in the shares of spending in GDP.
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Unemployment rising slightly, especially for women: quick analysis of registered unemployment
Grossmann, Jakub ; Münich, Daniel
The effects of the covid-19 crisis on registered unemployment have almost subsided. Excluding annual seasonal effects, the registered unemployment rate rose slightly in August '23. Nevertheless, the Czech unemployment rate remains one of the lowest in the EU27. The gender gap in the unemployment rate has widened in recent months due to faster unemployment growth among women. Occupational, educational and age differences persist. However, despite the worsening economic situation, unemployment remains low.
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No cooling of the Czech labour market yet: quick analysis of registered unemployment
Grossmann, Jakub ; Münich, Daniel
The effects of the covid-19 crisis on registered unemployment have almost subsided. Excluding annual seasonal effects, the registered unemployment rate fell slightly in April '23. The Czech unemployment rate thus remains the lowest in the EU27. The gender gap in the unemployment rate has increased markedly over the past year and remains stable. Occupational, educational and age differences persist. The predicted cooling of the labour market due to the economic downturn has not yet materialised.
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Gender gap in reported childcare preferences among parents
Pertold, Filip ; Sinani, S. ; Šoltés, M.
The child penalty explains the majority of gender employment and wage gaps, however, less is known about the factors driving the child penalty itself. In this paper, we study the gender gap in childcare preferences as a potential factor that contributes to the child penalty. We surveyed Czech parents and elicited the minimal compensation they would require to stay home to care for a child. Mothers require less compensation for childcare than fathers. The estimated gender gap in childcare preferences is CZK 2,500 monthly, 7.6% of the median female wage, and cannot be explained by differences in labor market opportunities or prosocial motives to care for a family member. We further document widespread misperception of fathers’ preferences, as respondents incorrectly expect fathers to require less to care for a child than to care for an elderly parent.\n
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Hostility, population sorting, and backwardness: quasi-experimental evidence from the Red Army after WWII
Ochsner, Christian
Does a short episode of conflict or exposure to hostile troops cause regional economic backwardness, and if so, why and how does it persist? I answer these questions by exploiting economic differences across the idiosyncratic and short-lived line of contact between the Red Army and the Western Allies in South Austria at the end of WWII. Spatial regression discontinuity estimates show that hostile presence of the Red Army for 74 days caused an immediate relative population decline of around 12%, amplified to 25% by today. Age-specific migration patterns and subsequent fertility differences explain the multiplying effects. Sector development and measures of local labor productivity in 2011 also lag behind in regions briefly seized by the Red Army, likely driven by skill-specific migration and hampered investment patterns after WWII. The findings provide novel insights into the long-run effects of wars and conflicts, and point to the isolated role of the Red Army’s hostile actions after WWII to understand the European economic East-West divide.\n
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Human capital affects religious identity: causal evidence from Kenya
Alfonsi, L. ; Bauer, Michal ; Chytilová, Julie ; Miguel, E.
We study how human capital and economic conditions causally affect the choice of religious denomination. We utilize a longitudinal dataset monitoring the religious history of more than 5,000 Kenyans over twenty years, in tandem with a randomized experiment (deworming) that has exogenously boosted education and living standards. The main finding is that the program reduces the likelihood of membership in a Pentecostal denomination up to 20 years later when respondents are in their mid-thirties, while there is a comparable increase in membership in traditional Christian denominations. The effect is concentrated and statistically significant among a sub-group of participants who benefited most from the program in terms of increased education and income. The effects are unlikely due to increased secularization, because the program does not reduce measures of religiosity. The results help explain why the global growth of the Pentecostal movement, sometimes described a “New Reformation”, is centered in low-income communities.
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Professional survey forecasts and expectations in DSGE models
Rychalovska, Y. ; Slobodyan, Sergey ; Wouters, R.
In this paper, we demonstrate the usefulness of survey data for macroeconomic analysis and propose a strategy to integrate and efficiently utilize information from surveys in the DSGE setup. We extend the set of observable variables to include the data on consumption, investment, output, and inflation expectations, as measured by the Survey of Professional Forecasters (SPF). By doing so, we aim to discipline the dynamics of model-based expectations and evaluate alternative belief models. Our approach to exploit the timely information from surveys is based on re-specification of structural shocks into persistent and transitory components. Due to the SPF, we are able to improve identification of fundamental shocks and predictive power of the model by separating the sources of low and high frequency volatility. Furthermore, we show that models with an imperfectly-rational expectation formation mechanism based on Adaptive Learning (AL) can reduce important limitations implied by the Rational Expectation (RE) hypothesis. More specifically, our models based on belief updating can better capture macroeconomic trend shifts and, as a result, achieve superior long-term predictions. In addition, the AL mechanism can produce realistic time variation in the transmission of shocks and perceived macro-economic volatility, which allows the model to better explain the investment dynamics. Finally, AL models, which relax the RE constraint of internal consistency between the agents’ and model forecasts, can reproduce the main features of agents’ predictions in line with SPF evidence and, at the same time, can generate improved model forecasts, thus diminishing possible inefficiencies present in surveys.
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Secondary school admissions: a sophisticated mechanism or a big national lottery?
Protivínský, Tomáš
The spring 2023 secondary school admissions process has fully revealed the shortcomings of the established admissions system. The combination of a baby boom and a large mismatch between the structure of supply and demand, the system has left many children\nand their parents unnecessarily uncertain about secondary education. Although the vast majority of applicants eventually get into a secondary school, the mechanism in place to match applicants with schools is inefficient and inequitable. The system forces students\nand parents to strategize ways to select schools, and disadvantages children of less informed and less sophisticated parents, contributing to high inequalities in access to education over the long term. The system also generates highly skewed information on the structure of demand, which complicates management of admissions. A major change in the admissions procedure is therefore planned for spring 2024. It is expected to eliminate at least some of the main problems. Electronic application should simplify the process, and will allow pupils to apply to three schools instead of two. Prioritization of schools should then allow for automatic enrollment of those admitted. It should also minimize the chaotic second round period when pupils who are not enrolled in the first round apply for vacant places.
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