Open AccessDirect and indirect impact of federal transfer to individuals and to the government of Puerto Rico.
Author(s) -
Ruiz Mercado,
Luís Ángel
Publication year - 2013
Publication title -
revista finanzas y política económica/revista finanzas y política económica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.121
H-Index - 3
eISSN - 2248-6046
pISSN - 2011-7663
DOI - 10.14718/revfinanzpolitecon.v5.n2.2013.441
Subject(s) - transfer payment , economics , incentive , transfer (computing) , payment , wage , work (physics) , government (linguistics) , labour economics , wages and salaries , gross income , demographic economics , public economics , state income tax , tax reform , finance , welfare , mechanical engineering , linguistics , philosophy , parallel computing , computer science , engineering , market economy , microeconomics
The Puerto Rico Planning Board classifies individual transfer payments into two categories: “earned transfers” and “granted” transfers. The purpose of this work is to estimate the direct and indirect economic effects of federal and other transfer payments to Puerto Rico using two input-output models and two vectors of employment and income coefficients base on tables for years 1992 and 2002. The economic impacts were estimated for three economic indicators namely, gross output, direct and indirect employment and direct and indirect wage income. The results presented in this work shows that the argument that Puerto Ricans enjoy relatively generous income supplements and retirement benefits without imposing heavy tax burdens on highly compensated workers failed to distinguish that most of the transfer payments to individuals were in the category of earned transfers. It is doubtful that this type of transfer “impose heavy tax burdens” to American taxpayers. Since we are an open economy most of the income generated by transfer to individuals is spent of goods and services a substantial amount of which comes from United States. It is also doubtful that earned transfer to individuals (especially transfers in the form of pensions and payments to veterans) have any significant impact on the labor force participation rate or the incentives to work.