Wealth and Politics: Studies on Inter Vivos Transfers and Partisan Effects
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A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Schinke, Christoph Research Report Wealth and Politics: Studies on Inter Vivos Transfers and Partisan Effects ifo Beiträge zur Wirtschaftsforschung, No. 67 Provided in Cooperation with: Ifo Institute – Leibniz Institute for Economic Research at the University of Munich Suggested Citation: Schinke, Christoph (2016) : Wealth and Politics: Studies on Inter Vivos Transfers and Partisan Effects, ifo Beiträge zur Wirtschaftsforschung, No. 67, ISBN 978-3-95942-012-9, ifo Institut - Leibniz-Institut für Wirtschaftsforschung an der Universität München, München This Version is available at: http://hdl.handle.net/10419/167364 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. 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Herausgeber der Reihe: Clemens Fuest Schriftleitung: Chang Woon Nam ifo Beiträge 67 zur Wirtschaftsforschung Wealth and Politics: Studies on Inter Vivos Transfers and Partisan Effects Christoph Schinke Bibliografische Information der Deutschen Nationalbibliothek Die Deutsche Nationalbibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie; detaillierte bibliografische Daten sind im Internet über http://dnb.d-nb.de abrufbar ISBN-13: 978-3-95942-012-9 Alle Rechte, insbesondere das der Übersetzung in fremde Sprachen, vorbehalten. Ohne ausdrückliche Genehmigung des Verlags ist es auch nicht gestattet, dieses Buch oder Teile daraus auf photomechanischem Wege (Photokopie, Mikrokopie) oder auf andere Art zu vervielfältigen. © ifo Institut, München 2016 Druck: ifo Institut, München ifo Institut im Internet: http://www.cesifo-group.de Preface This dissertation was prepared by Christoph Schinke while he was working at the ifo Institute. It was completed in December 2015 and accepted as a doctoral thesis by the Department of Economics at the University of Munich in May 2016. The dissertation elaborates on topics that are related to (i) intergenerational transfers of wealth and to (ii) how government ideology and elections influence outcomes (income inequality and budget consolidation) and political processes (fiscal planning and policy advice). The dissertation consists of six studies. The first study investigates the determinants of inter vivos transfers of firm ownership. The results show that owners of larger firms, and firms with strong current business conditions, transferred ownership at higher rates than others. Inter vivos transfer rates also rose following a 2009 tax reduction on transfers of business assets. The second study delves into how the 2009 transfer tax reform influ- enced individual inter vivos transfers in Germany. The results do not show that the re- form influenced transfers within the nuclear family, whereas transfers to close relatives and to unrelated recipients increased by about 30 percent. The third study describes how government ideology and globalization were associated with top income shares in OECD countries. The fourth study shows that German state politicians’ and govern- ments’ words differed from actions regarding budget consolidation and the German debt brake. The fifth study describes how government ideology and upcoming elections in- fluenced fiscal planning in German states. The results show that East German state gov- ernments underestimated the size of government in pre-election years. The sixth study investigates how ideological positions of German economic research institutes influ- enced policy advice in the Joint Economic Forecast. Keywords: balanced-budget rule, decision making in committees, debt brake, elec- toral cycles, expressive rhetoric, family firms, fiscal forecasts, globaliza- tion, government ideology, inequality, inter vivos transfers, Joint Eco- nomic Forecast of German economic research institutes, minority voting, nuclear family, panel data models, partisan theory, public debt, SOEP, tax reform, transfer taxes JEL-Codes: D22, D31, D72, E32, E62, F62, H24, H60, H68, H72, H80, I23, N30 Acknowledgements I am deeply grateful to Niklas Potrafke for guiding my work over the past years. His vigorous efforts and pragmatic approaches to any sort of challenge were a constant source of motivation to me. I am also grateful to Panu Poutvaara and Gebhard Flaig for kindly agreeing to be the second and third reviewer of the dissertation. Collaboration with my co-authors James R. Hines Jr., Björn Kauder, Ha Quyen Ngo, Niklas Potrafke, and Marina Riem was great and I thank them for fruitful and mutually inspiring cooperation. With my colleagues Andreas Bastgen, Christian Breuer, Julian Dieler, Alexander Ebertz, Kai Jäger, Björn Kauder, Manuela Krause, Markus Reischmann, Marina Riem, Marie-Theres von Schickfus, and others, we had a great time and I thank them for ad- vice, good conversations, and their friendship. I am grateful to Chang Woon Nam, Thomas Piketty, and Hans-Werner Sinn for some crucial comments. Conference and seminar participants in many places and reviewers also provided helpful comments that improved my papers a great deal. Research assistants, many interns, our team assistants Annette Engellandt and Sabine Kolbinger, and other staff at the ifo Institute provided excellent support for research and project work. For proofreading the dissertation, thanks are due to Mathias Iwanowsky, Ana Maria Montoya Gómez, and Elisabeth Schinke. During all my endeavors, my family has always been a shelter. Finally, I wish to thank Ana for taking this journey called life with me. Wealth and Politics: Studies on Inter Vivos Transfers and Partisan Effects Inaugural-Dissertation zur Erlangung des Grades Doctor oeconomiae publicae (Dr. oec. publ.) an der Ludwig-Maximilians-Universität München 2015 vorgelegt von Christoph Schinke Referent: Prof. Dr. Niklas Potrafke Korreferent: Prof. Panu Poutvaara, Ph.D. Promotionsabschlussberatung: 11. Mai 2016 vii Contents 1. Introduction 1 References 10 2. Inter Vivos Transfers of Ownership in Family Firms 13 2.1. Introduction 13 2.2. Inter Vivos Transfers and Family Firms 15 2.3. German Inheritance and Gift Taxes 17 2.4. Analytical Framework 18 2.4.1. Timing of Ownership Transfers 18 2.4.2. Taxable and Market Values of Family Business Property 20 2.5. Data and Descriptive Statistics 22 2.5.1. Data 22 2.5.2. Descriptive Statistics 24 2.6. Empirical Analysis 28 2.6.1. Empirical Strategy 28 2.6.2. Results 29 2.6.3. Robustness Tests 33 2.7. Conclusion 36 References 38 Appendix: Additional Tables and Figures 41 3. Inter Vivos Transfers and the 2009 German Transfer Tax Reform 45 3.1. Introduction 45 3.2. Literature 46 viii 3.3. Inter Vivos Transfer Taxation and the 2009 Reform 48 3.4. Data 50 3.5. Empirical Approach 52 3.6. Results 57 3.7. Robustness Tests 63 3.8. Conclusion 66 References 68 Appendix: Additional Tables 71 4. Government Ideology, Globalization, and Top Income Shares in OECD Countries 73 4.1. Introduction 73 4.2. Related Studies 75 4.2.1. Top Income Shares 75 4.2.2. Government Ideology and Inequality 76 4.2.3. Globalization and Inequality 76 4.3. Data 78 4.4. Empirical Approach 79 4.5. Results 81 4.6. Robustness Checks 86 4.7. Conclusion 89 References 90 Appendix: Additional Tables and Figures 95 ix 5. Debt Brakes in the German States: Governments’ Words and Actions 105 5.1. Introduction 105 5.2. Public Debt and Government Ideology 107 5.3. German Debt Brake 109 5.4. Governments’ Words 112 5.5. Governments’ Actions 113 5.5.1. Voting Behavior 113 5.5.2. Policy Measures 114 5.5.3. Aggregate Outcomes 116 5.6. Conclusion 122 References 124 Appendix: Additional Tables and Figures 129 6. Manipulating Fiscal Forecasts: Evidence from the German States 135 6.1. Introduction 135 6.2. Related Literature 136 6.3. Institutional Backdrop 138 6.3.1. Budget Rules 138 6.3.2. Projections of Fiscal Figures 139 6.3.3. State Elections 140 6.4. Empirical Analysis 140 6.4.1. Descriptive Statistics 140 6.4.2. Empirical Strategy 144 6.4.3. Regression Results 145 6.4.4. Robustness Tests 148 6.5. Conclusion 151 References 152 Appendix: Additional Tables and Figures 157 x 7. Ideology and Dissent among Economists: The Joint Economic Forecast of German Economic Research Institutes 163 7.1. Introduction 163 7.2. Joint Economic Forecast and German Economic Research Institutes 165 7.2.1. Joint Economic Forecast 165 7.2.2. Ideological