We extend research on the impact of BEPS Action 13 on profit-shifting behavior to include the role of the master file and local file (MFLF). Our evidence from confidential tax return data from The Indonesia Tax Authority shows that firms obligated to submit the MFLF have lower taxable income than firms that do not submit the documents. Reflecting its impact on firms, it indicates that firms continue profit-shifting behavior. Furthermore, we provide evidence of channeling profit-shifting through intra-group transactions, such as sales and purchases, payment of debt and service remuneration via related-party transactions. The outcomes provide valuable insights into profit-shifting behavior vis-à-vis private disclosure within emerging countries, offering pertinent information for accounting researchers and tax authorities.

In general, special tax regimes create inefficiencies and might destroy horizontal equity, Additionally, they also create opportunities to hide income and avoid taxes.

To study the magnitude of tax avoidance of special tax regimes in Chile and their effects on horizontal equity, I use administrative data from the Chilean IRS to simulate a tax reform that replaces them with a cash flow tax for small firms.

The results show that a reform of this type would have positive effects, especially in terms of horizontal tax equity as 85.6% of the profits from firms under presumptive taxes and 77.6% of the profits from the small firms under special tax regimes, belong to taxpayers in the top income decile.

Using administrative tax data from the Uganda Revenue Authority, this study shows as one of the first in a developing country setting that multinational corporations (MNCs) lower their corporate tax burden through two channels: lower effective tax rates and profit-shifting. MNCs pay an approximately 20 percentage points lower effective tax rate on their reported profits than large domestic corporations because of tax treaties and other benefits. However, they are also more likely to report losses than domestic firms. This is likely due to profit-shifting, as the lower the tax rate in the country of the global ultimate owner, the lower the reported profit of the affiliate in Uganda. Estimating effective tax rates in three alternative ways in combination with a profit-shifting analysis provides new insights on the stage at which tax revenues are forgone and methodologically highlights the possibilities of using administrative tax data for evidence-based policy making.

In this study, we examine the impact of Uganda’s transition from Thin Capitalization Rules (TCR) to Earnings Stripping Rules (ESR) in 2018 on corporate profit shifting behaviour. Our preliminary findings suggest that the adoption of ESR led to a significant decrease in both the leverage and interest expenses of treated companies. Notably, this shift was associated with a decline in real economic activity with both sales and investment going down after the reform. Despite these reductions, the ESR regime enabled Uganda to generate higher revenue compared to the TCR system. Additionally, our analysis indicates that ESR specifically targets firms with high leverage relative to earnings, in contrast to

TCR, which focuses on companies utilizing debt financing over equity financing.

Cross-border shopping of alcoholic beverages reduces domestic sales and tax revenue. We estimate the magnitude of Norwegian cross-border shopping of hard liquor and wine and its effects on tax revenue by using the travel restrictions during the COVID-19 pandemic as a natural experiment. The Norwegian alcohol retail market is controlled by a state monopoly (Vinmonopolet), and our data set includes the complete transaction data of Vinmonopolet. The effects are identified by using a difference-in-difference approach comparing changes in sales in stores with different driving time to the nearest foreign alcohol store. We find reduced sales in the stores of Vinmonopolet for driving times up to three hours. The reduced sales are about 9% for wine and 6% for hard liquor corresponding to almost one billion NOK in lost annual tax revenue.

Products with negative externalities are often subject to regulations that limit competition. The single-product case may suggest that it is irrelevant for aggregate welfare whether output is restricted via corrective taxes or limiting competition. However, when products are differentiated curbing consumption through market power is costly if purchase decisions of inframarginal consumers are distorted. We examine a regulation known as post-and-hold (PH) used by a dozen states for the sale of alcoholic beverages. Theoretically, PH eliminates competitive incentives among wholesalers. We assemble unique data on distilled spirits from Connecticut, including matched manufacturer and wholesaler prices, to evaluate the welfare consequences of PH. PH leads to substantially lower consumer welfare compared to excise, sales or Ramsey taxes by distorting consumption choices away from high-quality and towards low-quality brands. Replacing PH with taxes could reduce consumption by over 9% without reducing consumer surplus, and increase tax revenues by over 300%.

This paper studies the repercussions of biased tax enforcement on firms’ export per- formance. Mandated transparency at Customs enhances tax authorities’ capabilities for scrutinizing exporting firms, potentially creating an implicit barrier to global market participation. Leveraging an institutional reform in China that introduced exogenous variations in tax enforcement practices for two sets of comparable firms, I estimate the impact of such information-based tax enforcement for manufacturing firms. I find that this bias leads to underperformance in export market, primarily in the intensive margin. Further investigation suggests that effects come from the product portfolio choices: firms under such bias display a great tendency to be a single-product exporter and have a smaller product scope. Heterogeneous effects underscore the paramount significance of fixed costs regarding exporting.

Taxes and tariffs on imports are a major source of government revenue for many developing countries. This means that tax evasion at the border through understating the amount and value of imports as well as mis-classifying them as lower-taxed goods represents a potentially significant loss to much-needed public funds. In the recent years, many countries implemented non-intrusive fixed cargo scanners at entry points as one way to mitigate such misreporting, providing a quasi-experimental treatment setting. Using transaction-level customs data for Uganda, we estimate the impact of scanners on trade and taxes collected at the border. Our estimates suggest that while these scanners reduced evasion, they also raised trade costs. The net impact of these two effects was to lower tariff revenues at the affected entry points by 0.898 percent and VAT receipts by 0.66 percent. t.

While tax avoidance has been identified as the primary behavioral response to inheritance and gift taxation, relatively few is known about the potentially negative externalities of inheritance and gift tax avoidance on production, employment and output of firms being transferred from one generation to the next. In this paper, we study the effect of business gift tax avoidance on firm growth and employment in Germany. Since 2009, the German inheritance and gift tax law creates an incentive to downsize before a firm transfer. We estimate excess separations before ownership transfer of family firms to quantify the efficiency cost of inheritance and gift tax avoidance in Germany, where family firms represent the backbone of the economy. We find that affected firms cut 5 to 20% of firm size before firm transfer.

Wealth transfer taxes are important instruments to counter increasing wealth inequality. Yet, inter-generational business transfers, whose distribution is particularly concentrated at the top, are inherently difficult to tax. This is due to preferential tax treatments in many countries and sophisticated tax avoidance strategies by business owners. We analyze how business transfers react to anticipated changes in such preferential tax treatment using German administrative gift tax return data. We find strong timing responses of business transfers to expected tax changes, particularly for large transfers of business wealth. We further estimate that the amount of foregone gift tax revenue due to timing responses is up to 2.8 times the size of actual annual inheritance and gift tax revenue.

This paper studies tax-minimizing behavior of wealthy individuals. Drawing on the universe of inheritance tax returns filed in Catalonia, I study tax-minimizing strategies to an increase in effective tax rates faced by heirs at the top 5% of the inheritance distribution. To identify causal effects, I use a difference-in-difference design comparing wealthy descendants to spouse inheritors who were barely affected by the policy change. After the tax reform, wealthy descendants inherit a higher fraction of tax-favored assets and report lower taxable inheritances. This shift in the asset composition of inheritances is explained by a sharp increase in the proportion of wealthy descendants inheriting equity shares in family business. Wealthy testators seem to create family business to relabel financial and real estate wealth into business assets. The change in the asset composition of inheritances accounts for 52% of the forgone tax revenue associated to the behavioral responses elicited by the reform

Empirical research has established that privately held firms are used to respond to various tax margins. A separate strand has shown that income given or passed on to children responds to gift and inheritance taxation. This paper shows new evidence that privately held firms are additionally used to provide income to underage children, creating considerable inequalities among children. We show that individuals who own firms and are located in the top 0.1% of the income distribution, are seven times more likely to have underage children as co-owners in their firm, compared to the bottom 90%. The mean age of these children is 12 years, and ownership occurs at all ages between 0-17. Underage children who own firms earn such high incomes that would allow them to accumulate wealth to place them near the median wealth of middle-aged single adults.

This paper establishes a causal link from fairness beliefs to perceived economic inequality. I conduct an experiment where participants are asked to estimate various income inequality measures of hypothetical societies. While the true income distributions of the societies remain identical and simple, the description of the societies varies to indicate ``fair” and ``unfair” inequality across respondents. Describing the society as unfair increases the incentivized estimated top 10% income share as much as the actual difference between Denmark and the United States. Other inequality metrics are similarly affected. The findings imply that ideological beliefs fundamentally alter how people perceive economic inequality.

Many economic systems aim to combine economic efficiency, equity, and ecological sustainability. A fundamental question is how important the different dimensions are for the success of a country and to what extent there are trade-offs between them. We survey economists around the world and a representative sample of German citizens regarding their perceptions on the importance of the dimensions and trade-offs. We find that while economists rank efficiency as most important, sustainability and equity are deemed almost as important for the success of a country. In contrast, laypeople most often assign equal weight to all three dimensions. While we find substantial disagreement among economists regarding trade-offs, among the population we find a central tendency bias. This bias seems to be partially driven by educational differences. The differences we find between economists and laypeople may be responsible for the populations’ skepticism towards many solutions proposed by economists.

We bring together the inverse optimal taxation and the fairness literature. We invert a fair tax formula and apply it to tax-benefit schemes in Europe to estimate the implicit degree of compensation for each factor that determines individual well-being. We provide a new way to formalize the intuition that, in a fair society, people should be allowed to benefit more from their efforts than from exogenous characteristics. Our empirical results confirm this intuition. We provide the first estimates of implicit tax rates for different characteristics in 31 European countries using EU-SILC data for the years 2007 - 2018. We find a robust tendency in all countries to compensate more for uncontrollable characteristics compared to the partially controllable ones. We then attempt to calculate which countries currently have fair tax systems. Only the Continental countries France and Luxembourg pass the fairness test, whereas the Baltic and Anglo-Saxon countries perform worst.

While the statutory corporate income tax rate in the EU fell by 9% between 2014 and 2022, the effective tax rate of affiliates of multinational enterprises dropped by 14%. We argue that corporate tax policy making has shifted away from the 'cut rate - broaden base' approach. Building a novel database of tax reforms in the EU, we document the growing trend of adopting tax base narrowing measures. We find indication that tax-base narrowing reforms had a negative impact on ETRs of affiliates of MNEs which was only to a small extend compensated by base-broadening reforms. Taken together, tax base reforms account for 36% of the reduction in ETRs, compared to 9% attributable to changes in statutory rates. Finally, we explore the political determinants of adopting tax reforms and find no significant differences between right-wing, center, and left-wing governments. This suggests that common trends shape corporate tax policies in the EU.

This paper analyzes the macroeconomic impact of corporate taxation. The analysis is conducted in a quantitative two-country model. In the first step, the paper describes the long-run effects of corporate taxation. A reduction in the corporate-income tax rate increases GDP, wages, consumption, investment, and business density. The trade balance is at the same time negatively affected. Firms headquartered in a country which lowers its corporate tax become internationally less active and instead focus more on their domestic market. In the second step, the paper presents adjustment dynamics that are induced by a corporate-tax reform. The dynamic response of the economy can substantially differ when comparing shorter and longer time horizons. The third step of the paper investigates the effects of international profit shifting in high-tax and low-tax jurisdictions.

The effective taxation of corporate profits is at the centre of an active public and academic debate. This debate often focuses on the extent of low-taxed profit of multinational enterprises (MNE) in jurisdictions with low statutory tax rates or average effective tax rates (ETRs). However, some affiliates in high tax jurisdictions may also be subject to low ETRs, due to tax incentives or other provisions. To date, a global accounting of the ETRs paid by MNEs that incorporates within-country heterogeneity has been missing. Using a new dataset on the global activities of large MNEs, this paper provides new estimates of the distribution of ETRs of large MNEs across and within jurisdictions. Our results show that low tax profit is common, and that more than half of low-taxed profit sit in high tax jurisdictions.

This paper explores the role played by preferential tax treatments as a channel explaining why MNEs have a lower effective tax rate than their domestic counterparts. Using a quasi-experimental design and panel data from 2011 to 2018, I estimate how a temporary decision by the EU General Court to annul the European Commission's decision of unlawful state aid of the Spanish scheme of amortisation of financial goodwill, affected effective tax rates of firms in Spain. This tax scheme allows companies taxable in Spain to deduct from their taxable income the financial goodwill deriving from the acquisition of a foreign company. I find a decline in the tax burden of MNEs when this specific Spanish scheme is allowed to be re-implemented. Domestic firms do not appear to benefit from this policy change suggesting that this measure is selective in nature and confer a preferential tax treatment to MNEs.

We study the impact of the 2022-2023 energy crisis in Germany. We collect 3 waves of panel data to measure how political attitudes change with increasing energy prices for households. Our difference-in-differences estimation exploits unique features of the German energy sector, which allows for a quasi-experimental design. We show that increases in electricity payments lead to a decline in support for democratic institutions, with effects intensifying over time. The study focuses on how economic shocks affect political attitudes. It has implications that range from climate policy to the rise of populism.

We study the relative merit of regulation by “prices vs. quantities” by assessing the instrument choice between carbon taxes and emissions trading systems from the perspective of public perceptions. In a stated-choice experiment across 15,000 respondents from seven European countries, we elicit how citizens perceive the (non-)economic properties of carbon taxation and emissions trading, and study how they are linked to public support. Our analysis is guided by value-based, reason-based and motivated reasoning approaches to public choice. While there is considerable cross-country variation in the appraisal of both instruments, treatments effects of instrument framing are sizeable: carbon taxes are consistently more often perceived as increasing the state budget, harming the economy, and increasing costs of living and production, and emissions trading is more often perceived as easy to evade. Our results suggests that public opinion on carbon pricing is primarily driven by perceptions around taxes being a 'tougher' measure.

We study the optimal taxation of carbon in a fiscal climate-economy model with incomplete markets. Our objective is twofold. First, we want to understand how the presence of inequality and uninsurable idiosyncratic income risk affects the optimal trajectory of climate policy, i.e. both its level and timing. Second, we want to understand how climate policy in turn affects the economy, i.e. the level of aggregate variables, redistribution, insurance provision, and welfare. To investigate these issues, we consider a Ramsey problem where the planner maximizes welfare by choosing the path of proportional taxes on capital and labor, transfers, and debt, as well as taxes on carbon emissions and energy production. We quantitatively study this Ramsey problem under various constraints over the choice of instruments, and highlight the trade-offs faced by a government seeking to jointly address inequality, imperfect insurance, and climate change.

Effective climate change mitigation requires green innovation, but not all projects have equal social value. We examine the role of innovation heterogeneity in a model where the policy maker cannot observe innovation quality and directly subsidize the socially most valuable green innovations. We find that carbon pricing works as an innovation screening device; this creates a premium on the optimal carbon price, raising it above the Pigouvian level. We identify conditions for perfect screening and generalize results to screening policies under alternative intellectual property regimes and complementary policies. A calibration reveals that screening can justify a carbon price that is up to three times the Pigouvian price.

In recent decades, many industrialized economies have witnessed a pattern of job polarization. While shifts in labor demand, namely routinization or offshoring, constitute conventional explanations for job polarization, there is little research on whether shifts in labor supply along the labor demand curve may equally result in job polarization. In this study, we assess the impact of labor supply shifts on job polarization. To this end, we determine unconditional wage elasticities of labor demand from a unique estimation of a profit-maximization model on linked employer-employee data from Germany. Unlike standard practice, we explicitly allow for variations in output and find that negative scale effects matter. Both for a skill- and a novel task-based division of the workforce, our elasticity estimates show that supply shifts from immigration and a decline in collective bargaining successfully explain occupational employment patterns during the 1990s.

This study investigates the effects of sector-specific wage floors established through collective

bargaining on job reallocation and wage mobility in Uruguay, using data from three bargaining

rounds in 2005, 2008, and 2014. By analyzing sectors categorized based on the percentage of

workers earning below these wage floors, we provide a nuanced examination of how wage policy

impacts employment distribution across hundreds of sectors and the mobility of low-wage workers. Our findings reveal significant job reallocation, particularly for low-wage workers who are more likely to move to better-paying positions due to the policy, a trend that persists across all examined rounds but diminishes in magnitude over time.

This paper contributes to the ongoing discourse on the taxation of top-income earners by empirically investigating the impact of tax policy changes on pay without performance. Using data on executive compensation in the United States I find that the effect of taxes on pay without performance depends on the type of taxes levied. Specifically, state tax hikes increase the sensitivity of executive compensation to performance shocks exogenous to executive effort. Conversely, changes in federal tax rates do not lead to changes in pay without performance. Pay without performance changes most in response to changes in state tax rates for executives who are more mobile. Based on a theoretical model I outline that these heterogeneous findings can be explained by the importance of outside options for the pass-through of performance-shocks to executive earnings.

We investigate (i) sources of inequality and business cycle fluctuations in the US and Japan and (ii) the effects of reducing inequality on business cycles. Developing a heterogeneous-agent business cycle model with unconstrained and hand-to-mouth households and various wedges to represent economic distortions, we estimate the model by the Bayesian methods. We find that, in the US, the labor market distortion specific to unconstrained households is the common factor that significantly impacts business cycles and consumption inequality, whereas there are no common factors in Japan. In both countries, the primary source of business cycles is distortions in aggregate productivity, and that of consumption inequality is household-specific labor market distortions. We assess labor market reforms and redistribution policy as means to reduce consumption inequality. Our findings imply that the effects of lowering inequality on business cycle volatility depend on the country and how it is done.

This paper develops a novel sufficient statistics approach to identify the insurance value of disability insurance (DI) benefits. Our approach estimates the insurance value from the relative DI take-up responses to more generous DI benefits and the take-up responses to wage reductions. Empirically, we find that increasing Canadian DI benefits by $1 creates a societal benefit of $1.9 (insurance value). At the same time, we estimate that a $1 increase in DI benefits costs society $1.5. We thus find that the improved insurance outweighs the additional costs of higher benefits in the Canadian context.

Despite young adults facing disproportionate poverty, barriers to implementing targeted transfer programs persist due to policymakers' concerns. This paper introduces a framework comparing the welfare effects of increasing government transfers to young versus older individuals. It accounts for age-dependent behavioral responses, including educational and labor decisions, and interactions with parental transfers. Leveraging bank data, I find the social marginal utility of transfers to young adults is 2 to 4 times larger than to older individuals. Accounting for fiscal costs, increasing transfers to young adults yields welfare gains 6 times higher for students from low-income families and 2 times higher for young workers compared to older individuals. These findings suggest redistributing resources from older to younger individuals would be highly welfare-enhancing.

Since 2005 unemployed workers in Finland with sufficient work history have had an option to enrol in a specific program aimed at encouraging labour market training participation and improving matches between the training programs and unemployed job seekers. The program participants meet a caseworker at the beginning of their unemployment spell and draft an individual-specific employment plan. In return, they are entitled to higher unemployment benefits for four weeks and to higher compensation whenever they participate in the labour market training programs specified in the employment plan. We evaluate the impact of this program on unemployment duration by comparing eligible and ineligible worker groups before and after the reform, using a difference-in-differences approach. We find a small reduction in the average unemployment duration for the program participants.The program increased labour market training participation in some groups, but did not improve their effectiveness.

This paper investigates how emigration of rural laborers affects public spending on rural schools in the origin regions in China. We build a theoretical model of local government decision-making on education spending facing both traditional and fiscal externalities. The model predicts that per student spending on public schools in origin regions decreases with emigration rate, which is stronger when more children are left-behind. We confirm these hypotheses using both OLS and IV estimators. Results are robust to alternative measures of emigration rate and education spending and different sample restrictions. We rule out alternative hypotheses likely consistent with the empirical findings.

This study assesses the impact of the reverse-charge mechanism (RCM) on VAT compliance proxied by the VAT gap, defined as the difference between expected and realized VAT revenues. Using annual information in 2000-2020 across 27 EU member states, we first exploit the staggered adoption of RCM by member states to compare VAT gap changes before and after RCM implementation and, additionally, consider variation in the size of economic activity targeted by RCM-adopting member states in the pre-implementation year. Our estimates indicate that RCM adoption does not lead to EU-wide VAT gap reductions and illustrate the mixed effectiveness of the RCM across goods and industries, suggesting its application on durable goods can be effective but not universally. These findings do not provide support for policy changes that cast the net of the RCM wider, although bilateral coordination in RCM adoption with top trading partners may assist in curbing VAT fraud relocation.

The Value-Added Tax (VAT) is widely recognized as being inherently self-enforcing because it features third-party reporting and spread withholding along the production chain. However, a growing literature documents significant VAT tax gaps, sparking interest in possible improvements to VAT design. Reverse Charge (RC) is among the main examples: recently adopted by multiple countries to a variety of industries, RC shifts the entire tax payment on retailers, which, however, remain subject to third-party reporting. Leveraging administrative firm-level data from Italy and a quasi-experimental variation, we show that RC leads to an increase of reported value added (+20 percent). The effect of RC is present across the distribution of firm size although it is stronger among small firms and companies that used to bunch around the zero-liability tax kink.

The Value-Added Tax (VAT) collection plays a role in achieving positive domestic revenue objectives through improved and reformed taxation, but VAT gap estimation is infrequently conducted in developing countries. This study uses novel tax declaration and audit data to estimate the VAT gap in Tanzania and its heterogeneity. We perform a machine learning approach to predict evasion assessment on unaudited firms and periods. We document evidence about the firm's strategic behavior to avoid forceful auditing and increased evasion. Those firms show the largest VAT gap in the data. By the machine learning approach, we estimate a VAT gap equal to 62%, and the Agricultural sector shows the largest VAT gap. Finally, we provide a cost-benefit ratio to indicate that it is cost-effective to redistribute resources to audit more intensive sectors with larger evasion and smaller audit probability.

Assessing tax gaps—the difference between the potential and actual taxes raised—plays a vital role in achieving positive domestic revenue objectives through improved and reformed taxation. This is particularly pertinent for growth outcomes in developing countries. This study uses a bottom-up approach based on micro-level audit information to estimate the extent of tax misreporting in Zambia. Our methods predict the extent of tax evasion using regression and a machine learning algorithm with a sample of audited firms, after which we estimate tax gaps using a standard approach. We estimate total tax gaps as 55% and 47% for the two approaches. This represents potential revenue with the least assumed tax evasion. These gaps are mainly driven by Corporate Income Taxes (CIT). Applying our gap to key industries shows that the extractives sector in Zambia records the highest gaps in terms of CIT and one of the lowest in terms of VAT.

Some fringe candidates, previously dismissed, have seen unexpected surges in popularity. We explore this issue by focusing on the dynamic interplay between social norms and elections. We develop a two-period electoral competition model with a mainstream candidate and a fringe candidate. Because the fringe candidate claims an extreme view that contravenes social norms, voting for her is stigmatized. We show that a sufficient vote share of the fringe candidate in the first period signals wider acceptance of the extreme view, eroding established norms even if the fringe candidate loses in the election. This triggers the rise of the fringe candidate in the second period. To induce the erosion of the norm, the fringe candidate tries to differentiate from the mainstream candidate on standard issues, whereas the mainstream candidate imitates the fringe candidate. Furthermore, heightened social norms in the initial election might enhance the future success of the fringe candidate.

In this paper, we formulate a general equilibrium theory that explains the existence and stability of democratically elected governments that support certain groups of individuals in society (insiders) to the detriment of everybody else (outsiders), even if the latter constitute a majority. The vehicle is a dynamic general equilibrium model, where insiders get monopoly rents and outsiders get less than what they would have gotten under a common good regime. We construct such political economy equilibria and we identify the conditions under which such political regimes (coalitions of insiders): (a) can safeguard against opportunistic behavior (i.e., do not fall from within) and (b) may come to power in the first place (i.e., manage to get elected). To that end, we highlight the role of ideology or self-serving bias as a gluing device to garner an electable coalition.

We present a model that integrates electoral competition of majority-minority redistricting with legislative redistribution to optimize minority representation. Analyzing voter allocation's impact, we find that minorities with limited political power benefit from concentrated districts, while stronger minorities prefer dispersed voter distributions. Majority voters voting for minorities has two effects: it helps minorities gain offices, but it may increase majority voters' influence and policy benefits. Paradoxically, adding minorities to a district is non-monotonic and can result in representatives less favored by minorities. The interplay between redistricting, electoral competition, and policy distribution offers novel insights into equitable minority representation and public policy.

We construct a unifying model of optimal decentralized policymaking that includes multiple tax and spending policies with mobile workers, mobile residents, and mobile capital. Local governments are linked by commuting patterns, the cost of which is endogenously determined by congestion. Both industrial capital and residential property taxes cause fiscal externalities on other jurisdictions, but these externalties arise because of the movement of workers and households, not through the movement of capital. The city-suburb commuting relationships give rise to asymmetric policy choices of each jurisdiction. Employment-based taxes are valuable when jurisdictions are net recipients of commuters, while jurisdictions that are net providers of commuters will choose to rely on the use of residential-based taxes. Cities will rely on commercial capital taxes and employment income taxes, while suburbs will rely on residential property taxes and residential head taxes.

Brain drain is a key policy concern for many countries. In this paper we study whether tax incentives are an effective policy to attract high-skilled expatriates back to their home country, exploiting a generous income tax break for Italian returnees. Using administrative data and a Triple Differences design, we find that eligible individuals are 27\% more likely to return to Italy. Additionally, we uncover significant effects throughout the wage distribution, revealing that tax-induced migration is a broad phenomenon beyond top earners. A cost-benefit analysis shows that the tax scheme can pay for itself by targeting young high-skilled individuals.

Top earners contribute to a large share of economic output and fiscal revenue. While there is evidence of migration responses to top tax rates, two important questions remain. First, what the extent of the phenomenon is outside of specific groups and second, how much of a constraint it poses for policy making. We use UK administrative data and leverage two major top tax rate reforms in France and the UK to evaluate how much top earners respond to general tax reforms by migrating. We observe a significant response, but it is concentrated among those who were the most likely to leave in the first place. We turn structural estimation to estimate the long term impact of tax changes on the stock of migrants among UK top earners and find that even modest responses can lead to significant stock changes in the long run.

This study investigates the impact of tax-induced reallocation of innovative activity on local economies. Leveraging US state-level R&D tax credit changes over time, we analyze the reallocation of patents and inventors within firm networks as proxies for shifts in innovative activities. We find a 0.8 percent decrease in successful patent applications at one firm location in response to a 1 percentage point increase in the average R&D tax credit rate establishments within the same firm network experience in other states. The decline in innovative activity also generates spillover effects on surrounding firms. Our results suggest a 0.8 percent decrease in patenting activity of local businesses without a nexus in other states if multi-state firms in their commuting zone are affected by changes in out-of-state R&D tax credits. Our findings highlight the broader implications of tax competition for innovation and overall welfare, offering insights for optimal tax policy design.

We use a novel rich-list data set to estimate the sensitivity of the location choice of super-rich foreigners to a special tax regime, under which wealthy foreigners are taxed on their living expenses, rather than their true income and wealth. We are the first to evaluate this controversial Swiss policy, and show that when some Swiss cantons abolished this practice, their stock of super-rich foreigners dropped by 43% as a consequence. We find no response for the Swiss super-rich, who were unaffected by the policy change.

Public procurement contracts are necessarily incomplete and require frequent ex-post renegotiation. In this paper, we first develop a stylized theoretical model of the effects of renegotiation policies on firms' bidding strategies and, consequently, on the winning bids and final prices of contracts. To empirically test the model's predictions, we then use a policy reform in the Czech Republic that implemented an EU Directive into Czech law, which eased the rules for renegotiation. Our findings show that (i) eased renegotiation rules lead to a decrease in the average winning bids; however, (ii) average final prices of contracts remain at the pre-reform level because the extra renegotiated price compensates for the drop in winning bids. While we do not find convincing evidence of a decrease in the productivity of the winning firms, we do provide suggestive evidence of a change in contract allocation towards firms with higher bargaining power.

This paper studies how the ratchet effect and managerial accountability affects the attainment non-binding performance targets within government. The U.S. federal government sets agency-specific goals for contract awards to small businesses. I find evidence of a ratchet effect, where small business utilization one year results in a higher goal the next. Under uncertainty, agencies may be conservative early in the year to avoid to unexpectedly high awards by year’s end, and I find evidence consistent with these within-year dynamics. Next, exploiting a 2013 increase in accountability for agency leaders in meeting small business goals, I examine how managerial incentives affect goal attainment. After this change, agencies accelerated small business awards when lagging behind their small business target. This acceleration is associated with a greater likelihood of adverse contract outcomes. Finally, I use an excess bunching design around sole-sourcing thresholds to demonstrate that the above patterns are intentional.

We explore the relationship between political donations and the allocation of public procurement contracts across multiple local elections in Colombia. By linking the universe of public contractors and the mandatory report of political donations by individuals and firms, our reduced form results demonstrate a long-term distortion in the contract allocation process attributable to political donations: Contractors who donate to political campaigns are more likely to be awarded contracts, often of greater value, exceeding budgetary limits. Donor contractors also tend to be less experienced individuals and riskier firms. Returns to donations remain even after losing direct political connections, suggesting that donations grant contractors extended access beyond immediate reciprocation. We conduct a Randomized Control Trial to study how new mayors respond to deterrence messages about contract scrutiny for their donors. Using this intervention, we estimate a structural model to rationalize the reduced form results and evaluate counterfactual policies.

This project scrutinizes the impact of public spending efficiency on aggregate firm productivity, with a specific focus on public procurement within the construction sector. We explore the different effects on a firm's productivity arising from two commonly employed awarding procedures: First Price Auction (FPA) and Average Bid Auction (ABA). While the FPA allocates the contract to the lowest bid, the ABA's method resembles a lottery in selecting the winner. FPA yields a threefold increase in turnover compared to ABA, with a particularly pronounced effect observed among smaller firms. Additionally, the study quantifies the aggregate loss in productivity within the Italian construction sector attributable to the introduction of ABA.

Rising income inequality and tight government budgets have spurred discussions in many developing nations regarding the taxation of high-income earners. We study taxpayer responses to an increase in the top marginal tax rate in South Africa drawing on exceptionally rich tax administrative data and a transparent empirical identification design. We establish that treated taxpayers strongly reduce their reported taxable income in response to the tax reform. Our preferred estimates suggest an elasticity of taxable income of around 1.2. Responses are driven by both reductions in broad income and increases in tax deductions. While regular, third-party reported earnings remain unaffected, we find significant decreases in fringe benefits, allowances, annual incentive and bonus payments. Consistent with the latter response reflecting less effort provision by leading workers in South African firms, we find that businesses which employ workers treated by the tax increase experience a significant decline in business output after the reform.

This study estimates the elasticity of income with regard to the net of tax rate using panel data from Japanese tax returns from 2014 to 2020. The following conclusions were drawn: First, in Japan, the elasticity of income with respect to the net of tax rate ranges from 0.25 to 0.52. These estimates are greater than or close to the ETIs for most OECD countries but are much greater than those provided by previous research for Japan. Second, income elasticities for business-income earners are larger than those for salary income earners. Third, the ETI estimates are much higher than the income elasticity estimates. This result probably reflects the fact that there was no large-scale reform in income tax rates during the sample period, thus making it difficult to precisely identify taxpayers’ behavioral responses to tax rates.

This paper estimates the elasticity of broad income (EBI) with respect to the marginal net-of-tax rate for high-income taxpayers. We study the introduction of a new top US income tax bracket in 2013 using a large panel of high-income taxpayers drawn from US administrative tax records. Taxpayers in the top tax bracket experience tremendous income volatility – more than one in four have year-on-year changes in broad income of more than 30 percent. This volatility shifts some across time and drives potential bias in all possible estimators. We propose a method for estimating this expected bias and use this information to select our estimator and bound any remaining bias. Our results have important policy implications for the optimal top marginal tax rate in the US.

The United Nations' "2030 Agenda for Sustainable Development" highlights the importance of formalizing the informal economy, which could potentially increase tax revenues in developing countries. This paper investigates the impact of formalization on optimal tax schedules, emphasizing the need for redistributive incentives alongside formalization. Extending the Mirrlees model to incorporate government intervention against the informal economy, we propose an optimal tax formula. Quantitative analysis shows that aligning the tax schedule with formalization increases tax revenue and income transfers while maintaining social welfare. The result can be interpreted as an implicit cost of welfare-neutral formalization in terms of tax revenues and income transfers. Conversely, leaving the tax schedule unchanged undermines these benefits. This research provides insights into the design of optimal tax policies that incorporate formalization.

We study the administration of income tax noncompliance penalties in Norway. Penalties potentially offer a low nominal-cost tool for tax administrations to use in reducing tax noncompliance. We design a model that conceptually illustrates the tradeoffs of penalties. We then produce descriptive statistics on the administration of penalties: who receives penalties and how costly are penalties? We find that penalty administration in Norway is small in scope, amounting to only to less than 1% tax collections and assigned to around .5% of taxpayers in a given year, and mildly progressive (albeit moreso at the top of the income/wealth distribution). Lastly, we leverages variation in timing of penalty recipiency in an event study setting that also compares the differential change in outcomes of high-rate to low-rate penalty recipients. We find that high-rate penalty recipients exhibit a sharper increase in reported income following penalty recipiency.

Corporate tax filings typically include a declaration of taxable earnings and auxiliary data. Tax compliance theory acknowledges using both inputs to improve tax enforcement policies. However, firms can misreport auxiliary data to benefit from weaker enforcement policies and increase evasion. To comprehend how this bias should be taken into account, we extend tax compliance theory to strategic data reporting. Our main finding is that, although the primary goal of an audit is to ensure truthful profit reporting, this objective cannot be achieved without also monitoring the submitted data. Otherwise, audit probabilities based on firm-reported data are misspecified, which allows firms to evade taxes by manipulating their data input. We describe examples where this can lead to a higher tax gap than disregarding data. The characterized optimal tax enforcement policy for strategic data involves a distortion at the top and non-constant penalties.

This paper investigates how price misperceptions, which are pervasive and mainly ascribed to a complex system of mixed tax schedule, affect the design of optimal tax rules. Our theoretical results show that in the presence of price misperceptions indirect taxation exerts both a corrective role and a redistributive role even with the preference structure of Atkinson and Stiglitz (1976). This makes the linear commodity taxation no longer superfluous. In particular, the optimal income tax schedule can be more progressive if perceived marginal income tax rates are influenced by commodity prices. Moreover, taking income tax credit for electric vehicles as an example we simulate the optimal subsidy rate and income tax schedule when price misperceptions are considered in the design of optimal mixed taxation. Compared with conventional optimal taxation, optimal taxation in our model results in a rise in welfare by 8.79% to 36.34\% under plausible values of labor supply elasticity.

In 2018, South Korea reduced a long-standing tax credit for automation investments. This tax credit reduction increases tax costs, is a negative tax incentive on robot installations and resembles the introduction of an indirect robot tax. We analyze the impact of this reform on corporate investment behavior and employment of South Korean firms. We use company-level data on South Korean firms and apply a difference-in-differences setting, exploiting both variation with regard to treatment and variation in robot densities across industries. We find consistent negative effects of the reform on investment and employment and positive effects on investment quality. Our results show first empirical implications of a robot tax for companies.

We use matched employer-employee data to study how tax policies that lower the cost of capital impact workers during periods of sectoral decline. The policy we study, bonus depreciation, was implemented by the United States government in 2001, coinciding with significant employment declines in manufacturing. Using difference-in-differences event study methodologies, we estimate the effects of firm and market-level exposure to the policy on long-run worker earnings and employment. We then explore how sectoral transformation mediates the effects of bonus depreciation on worker outcomes by exploring heterogeneity across worker occupation, demographics, and exposure to salient drivers of manufacturing decline.

We investigate firms’ decisions to claim investment tax incentives following the 2014 tax reform in Japan and their impacts on economic outcomes. Our novel instrumental variable, the ratio of tax-eligible capital input costs to total costs at the industry level, explained the variation in firms’ tax claims. Financially constrained firms and those with tax loss carryforwards claimed the tax incentives less often than their counterparts. Tax claimants increased capital expenditures compared to pre-claim levels, with this effect being pronounced among financially constrained firms. However, tax claiming did not improve overall productivity. While we observe a rise in labor productivity, this result was due to a reduction in employment, not an increase in value added. Our findings suggest that when a relatively small proportion of firms—less than 20% in our analysis—claims tax incentives, focusing on actual claimants shows larger effects of tax incentives compared to the intent-to-treat approach.

In this paper we examine crowding-in and crowding-out of public and private sector investments in response to quasi-experimental variation in vertical transfers received by European Union regions. Leveraging a threshold in the allocation rule of EU Cohesion Policy funds, one of the largest regional policies globally, we conduct a Regression Discontinuity Design. Our findings indicate a crowding-out effect on public investments, ranging from 17 to 45 cents per Euro spent, primarily driven by a shift towards current expenditures. However, this effect is outweighed by substantial crowding-in of private sector investments, notably in construction, services, and the finance sector. Complementary Difference-in-Differences estimation provides some evidence for intertemporal substitution. Our results speak to the significance of complementarites between public and private investments in shaping fiscal multipliers, which holds important implication for the efficient design of the policy.

This paper explores the performance of governments’ budget forecasts. We argue that budget forecasts tend to be pessimistic if negative fiscal shocks are perceived to be more costly than positive fiscal shocks. Based on an asymmetric loss function, we show that the observed bias in budget forecasts is related to budget risks. We test these predictions with an empirical analysis of the German states’ forecasts of the budget-balance over a period of fourty years. The results confirm the existence of a robust downward bias for the short-term horizon, which disappears over medium forecast horizons. While we find that the bias is significantly associated with a measure of budget risks, the strong pessimism in short-term forecasts is attributed to larger adjustment cost in case of adverse fiscal shocks.

The classic assignment of functions of government entrusts the central government with the stabilization function. Nevertheless, subnational governments are intimately involved in stabilization policies of their own, often restricted by various rules or balanced budget constraints. This paper reviews this literature and follows and expands on a recent macroeconomic strand which estimates “regional multipliers.” I estimate separately regional multipliers for grants, rainy day funds, and a state’s deficit as well as spillover effects from these revenue sources.

The paper evaluates the forecasting performance of official estimates of the revenue effects of tax legislation, in the absence of dynamic scoring. The analysis is based on a detailed account of 246 German tax reforms, which result in 800 overall changes to individual taxes, at federal level over forty years covering the time period from 1982 until 2022. The preliminary results show that the revenue effects of tax reforms are systematically overestimated. If an increase (decrease) in revenues of 1% is predicted, actual revenues only increase (decreases) by around 0.73%. The overestimation is particularly evident in the case of income taxes, whereas changes in general sales taxes are estimated much more reliably - here the actual revenues vary proportionally with the revenue estimates.

This paper studies loan taking behavior of students. A major motivation for having publicly subsidized loans for students is that it would allow higher education students to focus on their studies. However, despite having access to publicly subsidized loans, they are under-utilized and instead students work while studying. We leverage a major reform that introduced a subsidies for student loans including a loan relief scheme for higher education students to study to what extent the loan taking of students respond to financial incentives. We utilize a quasi-experimental design by comparing loan taking behavior of students with that of non-student young individuals. We find a large impact of increased loan taking by students due to the reform. Despite this, the student loans remain under-utilized by students. In progress: working while studying, graduation times and grades.

This paper investigates the determinants of non-take-up for the means-tested federal student aid/ loan combination in Germany using a dataset of 22,000 students collected by the authors in 2023. Using the self-reported parents’ income, we simulated the student aid amounts. A Probit regression on non-take-up shows significant results for age, migratory background, living with parents, and acquaintances receiving BAföG which had the same effect directions but were not all significant in prior studies. Beyond these causes, we show other student grants and debt aversion as significant. For the first time, the central role played by misperceptions of entitlement and aid conditions on non-take-up becomes clear as a majority of non-take-up students do not believe that they are eligible. The main non-take-up reasons reported by this group are application effort and debt aversion, whereby this is possibly driven by their misperception of the repayment.

Welfare programs serve as crucial policy instruments for economic redistribution and poverty alleviation. However, evidence indicates that many eligible families often do not benefit from such programs. In this paper, I investigate take-up behaviors and their implications by leveraging exhaustive social administrative records related to a large French welfare program (“prime d’activité”) and using a recent major reform as quasi-experimental variation. The reform caused a substantial take-up behavioral response, leading half a million of families to start take-up. Using a diff-in-diffs strategy, I estimate a small elasticity of the take-up rate with respect to the benefit amount of about 0.1. I provide evidence that the reform indirectly raised awareness about the program which can explain the bulk of the take-up response. Building on these results, I develop a theoretical framework to derive insights into optimal welfare program design in the presence of endogenous labor supply and take-up decisions.

What makes policymaking similar or different across local governments? In this paper, we explore the determinants of similarity in local policymaking and quantify the deviation of local budgets from expected norms based on local characteristics. Public budgets are considered the standard proxy for government policy, yet standard public economic research usually focuses on a few of the main budget accounting features. AI tools allow us to examine the full budget structure. We find that similarity is mostly associated with the size and demographic composition, rather than political characteristics. Next, we generate a Municipal Fiscal Divergence Index (MFDI), which quantifies the deviation of local budgets from expected norms based on local characteristics. We show that MFDI is associated with political incentives, i.e., it is lower in the year preceding an election, complementing the existing evidence on political budget cycle.

Using the Covid-19 pandemic as a natural experiment, we examine gender differences in public funds allocation to childcare in Italy, one of the first countries severely hit by the crisis. We analyze close mixed-gender races in Italian local elections in small municipalities without gender quotas from 2016 to 2023. Our findings show that pre-Covid-19 female mayors spent more on childcare than male mayors, in line with the substantive representation hypothesis. However, during the pandemic, the gender gap closed, as male politicians increased spending, a trend that continued post-pandemic. Results reflect a change in voters’ preferences, as they are driven by male politicians facing re-election incentives and municipalities with more telework during the pandemic.

This paper studies the impact of female leaders during a migration crisis. In particular, I examine female mayors in the German state of North Rhine-Westphalia during the intake of Ukrainian refugees in 2022/23. I use granular data on compliance with the municipal refugee allocation quota and data on the municipal election of 2020. The identification strategy is a local difference-in-differences approach based on close mixed-gender races for the mayorship. Female mayors comply less with the allocation quota than male mayors in response to the crisis. The effect is not driven by other mayor characteristics or the fiscal capacity of municipalities. Also, there is no difference in the frequency of refugee topics in council meetings. Instead, I argue that strong electoral competition is a plausible mechanism inducing lower compliance of female mayors.

This paper explores the connection between jurisdictional fragmentation and sprawl. We utilize Finnish municipal mergers as a quasi-experiment which induces exogenous variation in the number of local jurisdictions in a given area. We are able to draw on rich register data providing granular location information for the full population of Finnish residents. We compare the location of new buildings (and their residents) in the actual mergers to the location of new buildings in a control group of hypothetical mergers simulated from the pre-merger municipality map in a difference-in-differences framework. When using our full sample, we do not find statistically significant effects on the location of newly constructed residential buildings. However, in smaller municipalities new single-family and row houses were built about 10% or 2 km closer to the new center. These effects materialize after two full council terms or roughly ten years and are driven by spatially compact and populous mergers.

Tax authorities implement various strategies to combat tax evasion, tax audits being one of the most important enforcement tools. Previous literature has separately studied the effects of an increase in audit probability, and the impacts of becoming audited, on income and cost reporting behavior of firms and individuals, but their joint effects have obtained less attention. I utilize a natural experiment setting in a highly developed country and study the effects of a tax audit campaign, implemented by the Finnish Tax Administration, on self-reported income and cost items using firm-level quarterly VAT records.

The results suggest that an audit campaign does not necessarily increase voluntary compliance in general, even though finding and taxing hidden income may result in additional revenue for the state. Possible explanations include low prevalence of tax evasion, poor salience of the public announcement about the campaign, and insufficient incentives for firms to increase their compliance.

We analyze firm responses to risk-based tax audits – a central tool in regular tax enforcement – using full-population data on tax audits and tax returns in Finland. We find an immediate and persistent increase in reported profits by the audited firms after being audited compared to matched non-audited firms with a similar development in key outcomes before the audit. This is an indication of significant non-compliance in the baseline. We also examine the anatomy of non-compliance and find that both revenue and labor costs increase after audits, suggesting that some firms may follow a strategy of under-reporting their overall scale of operation. We use novel data on bankruptcy petitions and court decisions to investigate whether stricter tax enforcement has implications for real economic activity. We find a large increase in the likelihood of bankruptcy after audits among non-compliant firms, but no increase in bankruptcies for compliant firms.

Simplified tax regimes are designed to encourage businesses to formalize, yet their effect on tax evasion is not well-documented. These regimes allow firms to report less information to tax authorities, lowering the cost of concealing their income. The study utilizes data from electronic billing systems to calculate a proxy for operational expenses. Additionally, it examines the distribution of firms' income to assess the inconvenience, or "hassle," cost associated with adhering to the conventional tax regime instead of the simplified approach. By integrating operational and hassle cost estimates, we construct a proxy for total cost. When comparing firms with similar cost structures, those operating under the standard tax system report significantly less revenue—between 35% and 50% less—than those under the simplified regime, highlighting the simplified tax regime's potential to reduce tax evasion and alter revenue declaration behaviors.

In this paper, we study formal workers receiving part of their off-the-books, which we refer to as "payments under the table'' (PUT). We conducted the first extensive survey among Brazilian formal workers, finding that PUTs are sizeable and proportionally larger for higher-income workers, despite the widespread belief that third-party reported income exhibits low evasion. Back-of-the-envelope calculations suggest that the government loses 6.8% of income tax revenues due to PUT. We open the black box of how this evasion works in practice.

We combine unique data on labor lawsuits, matched employer-employee, and ownership registries with quasi-experimental variation to shed light on the underlying incentives to engage in collusive tax evasion. We find that employees respond by reducing PUT when benefits for reporting increase. Moreover, employers reduce PUT when perceived risks of being sued are higher.

Using administrative plant-level data I study how the taxation of the capital stock affects firms and workers. Before a reform in 1998, the German local business tax was levied on two bases: profits and the capital stock. I exploit this unique setting to identify the effects of capital stock taxation. Businesses that experienced a larger tax cut increased investment and wages. However, aggregate employment was not affected in the long run. More exposed firms also earned higher profits. Comparing the estimates to the literature on corporate income taxation, I find slightly larger investment effects and similar effects on wages. In line with theoretical predictions, the tax cut also triggered increased firm entry, in particular by lower productivity firms. This resulted in lower average productivity. In contrast, I find that lower profit taxes are associated with higher productivity. This highlights the differences between taxing profits and capital.

We exploit the unique German setting of tying preferential tax treatment of

gratuitous business transfers to employment requirements to analyze the effects

of employment protection measures on affected firms. To this end, we combine

three data sources. First, we employ a large company database to identify ownership transfers in German firms between 2007 and 2022. Second, we link these

firms to death events drawn from multiple publicly available data sources to

build a panel of firms experiencing inheritance-related ownership successions.

Third, we obtain detailed employee outcomes for these firms from administrative establishment data. Preliminary results suggest that tying tax benefits to

employment requirements affects employee outcomes both in the short run and

long run.

We quantify behavioral responses to estate taxation by leveraging a tax cut and raise in Taiwan. Using a difference-in-difference design combined with administrative data, we show that net estates respond quickly and persistently. We estimate elasticities of net estates w.r.t. net-of-tax-rate is 1.7 (se 0.2) from the tax cut and 2.8 (se 0.4) from the tax raise. We find a discrepancy between the behaviors of those whose taxes are repealed and those whose tax rates are decreased but not removed, with the former having a substantially higher elasticity. A breakdown of net estates reveals taxpayers adjust assets or deductions that have greater flexibility for adjustments. Finally, we develop a model to explain our findings and derive sufficient statistics to assess the welfare effect. It is shown that the tax rates are too low and exemption thresholds are too high in both the old and new regimes.

We analyze behavioral responses to wealth taxation, exploiting variation from a reform reducing the marginal tax rate in the northern Norwegian municipality of Bø from 0.85% to 0.35%, since 2021. Mimicking the behaviour of a tax haven, Bø represents the first municipality unilaterally reducing the tax rate since the establishment of wealth taxation in Norway in 1892. We document a 66.6% increase in taxable wealth in response to a 1 percentage point drop in the tax rate. Internal mobility appears as the major behavioral response, accounting for a large portion of the post-treatment total net wealth in the treated municipality.

This study argues that portfolio theory can provide a powerful tool to make research funding decisions. The proposed methodology allows for an informed management decision process, also in the presence of project interdependencies and multiple policy objectives. Despite its potential to improve funding decisions, the portfolio model is not widely applied in practice. The most common approach is merit-based funding where the evaluators’ scores of the individual proposals guide funding decisions. A possible explanation is that conventions play a role in the selection process. Survey data show that policy practitioners working in the field of research and innovation policy have a relatively strong preference for the merit-based funding model, suggesting the presence of a “club-effect”.

We investigate the effects of monetary compensation on the duration of voluntary work, on donations, and on market labor income of paid volunteers using data from German income tax returns. In recent decades, volunteering has expanded from completely unpaid work to the possibility of receiving small (tax-free) monetary compensations for the activities performed. However, the effects of monetary incentives in the context of prosocial behavior are likely to differ from effects on paid work in the labor market. Our empirical analysis leverages a German policy change from 2013 that increased the tax-free threshold for volunteer compensations. We combine difference-in-differences and matching strategies with a duration analysis model to investigate the effects of changes in volunteer compensation on volunteers working as instructors or educators. This allows us to identify the dominant mechanism behind paid volunteers’ optimal choices for volunteering, market labor, and donations.

We examine the problem of voluntary participation in negotiations regarding the provision of public goods. In contrast to earlier studies, in our model, a negotiation is followed by renegotiations. First, players decide whether to participate in a negotiation, and the participants produce a public good. The participants then renegotiate the level of the public good with nonparticipants in the preceding negotiations. We show that with these renegotiation opportunities, many players may participate in providing the public good in the preceding negotiation. In some cases, all players participate in the preceding negotiation and the public good is produced efficiently. Our findings indicate that more players participate in the provision of public goods if they have strong bargaining power in the renegotiations. Hence, this problem may not be as severe as reported by previous studies. Our results may be consistent with the recent developments in voluntary projects for international river management.

We examine preferences for gender diversity in high-profile jobs, using stated-choice experiments with more than 9,000 highly educated individuals in Germany. Across three distinct samples covering university students, Ph.D. students, and university professors, we uncover a substantial willingness-to-pay for gender diversity at the workplace of up to 5% of earnings on average. Women have a much higher willingness-to-pay for gender diversity compared to men across all samples. Our findings carry insights for why organizations with a high share of men in top positions may find it difficult to attract and retain top-talent women.

This paper provides the first time series of the gender pay ratio for full-time employees in Germany since the 1870s and compares Germany’s path with the Swedish and U.S. cases. The industrialization period yielded slow advances due to women’s delayed inclusion in industrial work. The first half of the 20th century exhibited a marked leap. In Germany, the gender pay ratio increased from 47% in 1913 to 58% in 1937. Similar increases are visible in Sweden and the United States. In all three countries, the interplay between increased women’s education and increased returns to education due to the expanding white-collar sector fueled pay convergence. Yet in Germany, women’s educational catch-up was slowed due to the dominance of on-the-job vocational training. German women’s migration from low-paid to higher-paid jobs was predominantly increasing the pay ratio. The postwar period brought diverging developments due to different economic conditions and policy action.

Against the backdrop of persisting wage inequality between men and women in Western societies, we investigate what people believe about wages. Using a factorial vignette design, we explore two aspects: "What are people's beliefs about the gender wage gap?" i.e., perceptions of gendered pay, and "Do women and men have different beliefs about wages," i.e., gendered perceptions of pay.

Preliminary results on HR managers reveal interesting patterns. First, HR managers expect a gender wage gap of around 7%, aligning with Germany's adjusted gender gap. Furthermore, respondents believe that female workers have lower returns to high work performance than men, as well as lower returns to certain occupations.

Second, we show that female and male respondents have different beliefs about wages. Female HR managers expect lower wages overall, and gender differences emerge in expected returns on professional decisions, like part-time work or self-employment.

Young women in the workforce are more likely to experience a loss of earnings than young men, and this is often attributed to their decision to have children and take care of them. To better understand this gender gap, we analyse longitudinal tax data from Australia. Contrary to popular belief, having children explains at most 40 percent of the gap. Many women who experience a loss in earnings have not given birth to a new child. Instead, economic factors such as earnings level contribute to more than 50 percent of the gender gap. Moreover, low-earning women are especially vulnerable to earnings shocks. In a simulation exercise, we found that if men had the same impact of having children as women do, they would experience earnings loss twice as often.

This paper addresses the gap in the literature concerning the impact of the Belt and Road Initiative (BRI) infrastructure projects at a regional level. Utilizing a staggered difference-in-differences approach, we analyze the effects of BRI transport infrastructure, including railways, roads, and logistic hubs, on local development. To achieve this, we develop a geographic dataset detailing the timelines of project implementation and completion, and combine it with night light output and population data at the pixel level. Our results indicate a modest increase in population development following project completion, but no significant long-term regional economic growth as measured by nightlight output. Logistic hubs demonstrate greater developmental impacts compared to railways and roads. Overall, this paper contributes to our understanding of the potential effects of transport infrastructure on regional economies.

We analyze how the construction of highways in Switzerland affected the stock, births, deaths, and movements of firms as well as the firm structure at the Swiss municipal level. To do so, we constructed a novel geo-referenced dataset containing all limited companies including information on all members of their board of directors between 1943 and 2003. We exploit the variation in the timing of the access and use a staggered difference-in-differences approach. We find positive and sizable effects on the number of firms in the treated municipalities. Then, we document heterogeneous effects depending on two measures of firm sizes. We also show heterogeneity between municipalities receiving an access to the highways earlier than those receiving it later. Based on the director’s data, we can extend our study to include an analysis of firm networks (through common directors) and how these might have been affected by highway construction.

In 2022, Germany introduced a temporary 9-euro monthly ticket for unlimited local and regional public transport. We investigate its impact on mobility patterns, including increased public transport usage, reduced car traffic, and rail network congestion. Using difference-in-difference and event-study analyses with GPS-based mobility, traffic volume, and rail traffic data, we find limited substitution between transportation modes, a strong increase in leisure train journeys, and notable adverse effects on rail infrastructure quality. These effects dissipate after the ticket’s expiration. Our study suggests caution regarding the expected environmental benefits of nearly fare-free ’go-anywhere’ public transport tickets, which are discussed in several countries.

Le Corbusier’s vision for the modern city was that of bright houses set into green open spaces. Today real estate developers around the world pursue the Corbusian vision of light and air for all. This paper provides both an economic rationale for, and a welfare assessment of, the resulting daylit city. When acquiring an entire city block and then building up on only a fraction of it, modern developers build bright homes. These developers internalize the positive externality of daylighting neighboring houses. Yet opening up blocks (to let daylight in) also perforates streetfronts. These developers fail to internalize another positive neighborhood externality: Now there are fewer ’eyes on the street’, and this reduces neighborhood safety and urbanity. From a welfare perspective, streetfronts become too coarse and city blocks become built up too sparsely. This inefficiency calls for a system of suitable property taxes.

This paper investigates the interplay between tax expenditures (TEs) and social policy. Leveraging the Global Tax Expenditures Database, we carry out the first data-driven cross-country assessment of direct spending and TEs for social welfare to shed light on this often-overlooked aspect of fiscal policy. Our research reveals prevalent TE usage for social purposes and substantial costs in terms of revenue forgone, averaging over 1 percent of GDP and 6 percent of tax revenue. Our analysis showcases varying strategies employed by countries, emphasizing the reliance of high-income economies on TEs granted through personal income taxes, and low/middle-income countries predominantly using value-added tax-related TEs for social objectives. Some functions contribute significantly to social spending through TEs, e.g. housing shows a tax expenditure/direct spending ratio reaching roughly 365 percent in the US and 203 percent in France.

We link taxation to income inequality by focusing on twelve (12) African countries from 2005 to 2021. Analysis is based on two datasets drawn from the World Income Inequality Database, and the African Tax Administration Forum. We employ the random between-within effects model, and cluster at the level of a country’s income group—low, lower-middle, or upper-middle income country. We document that within-country income inequality declines as shares [in gross domestic product] of income taxes, international trade taxes, resource taxes, and taxes on capital gains increase. As income taxes rose, individuals from poorer countries gained more pre-tax incomes compared to their counterparts from richer countries. As resource or capital gains taxes rose, individuals from poorer countries gained more pre-tax incomes compared to their counterparts from richer countries. We conclude that income taxes as well as taxes on natural resources extraction, international trade, and capital gains, significantly reduce income inequality.

We analyze the effect of government size on social welfare and GDP per capita growth for the sample of 36 OECD countries in the last six decades. These effects are negative but smaller in absolute terms for welfare than for GDP per capita. This result is robust to changes in the estimation method, the use of smoothed variables, the inclusion of dummy variables that control for expansions and recessions, and additional control variables, such as the composition of expenditures and taxes, and public debt. More importantly, we find that the effect of government size follows an inverted U-shape: positive and greater on social welfare than for GDP per capita growth when government size is below 35% to 40%, and negative beyond that threshold. Interestingly, the range of values for which government size positively affects growth and welfare expands significantly with government quality, productive spending, and low levels of debt.

This paper analyzes the relation between economic growth, inequality and redistribution. In a cross-country setting for 25 EU countries over the period between 2007 and 2019, we show that market-income inequality is related to higher growth in the short term. To estimate the impact of redistribution to low-income earners, we introduce a new measure, the so called net benefit share (NBS). Contrary to other findings, we show that this (targeted) redistribution to low-income earners (Q1 NBS) fosters growth in the short term, driven by the consumption and private investment channel. On the other hand, untargeted redistribution towards higher-income earners reduces growth.

Many developing countries have expanded their pension systems in the last two decades. However, the low coverage of informal workers remains a serious issue. I analyze the impact of a Mongolian large-scale policy that redeemed missing contributions, leading to a relaxation of the contribution requirements. I estimate the price elasticity of public pension demand with respect to money's worth by a regression kink design approach with administrative data. I find small benefits for young individuals effectively promote participation, and large benefits crowd out additional contributions for certain existing participants. I also find gender-heterogeneous impacts possibly driven by different retirement ages.

We evaluate the impact of a policy reform in Sweden in 2020 that raised the early pension claiming age from 61 to 62. Employing administrative data from Sweden and a difference-indifferences approach, we analyze public pension claiming and labor market outcomes among age groups differentially impacted by the reform. We find that the reform led to an extension of working life until age 62, short-term reductions in disposable income for low-income earners, and slight increases in the uptake of sickness and unemployment benefits.

Brazil expanded its rural old-age pension to cover millions of previously uncovered women, conditional on work requirements, through a 1991 reform. We use an extended difference-in-differences approach to show that this expansion increased women’s employment by nine percentage points, or 26 percent. This increase in labor force participation occurred among women who were immediately age-eligible, and among younger cohorts that would be eligible in the future. These results illuminate the capacity of workers to respond to financial incentives for labor participation in old age, and the extent to which younger workers might be forward-looking as they respond to retirement incentives.

We study the influence of family members, neighbors and coworkers on individual retirement decisions. To estimate causal retirement spillovers between individuals, we exploit a pension reform in the Netherlands that creates exogenous variation in peers' retirement behavior, and we use administrative data on the full Dutch population. We begin by documenting large retirement spillovers between spouses, primarily due to women reacting to their husband's retirement choices. Consistent with homophily in social interactions, we find a modest influence of the average sibling, neighbor and coworker, but there are substantial spillover effects between similar individuals in these groups. Additional evidence suggests that retirement spillovers are driven both by leisure complementarities and social norms. Our findings imply that pension reforms can have a large social multiplier, amplifying their overall impact on retirement behavior.

This paper investigates the impact of the Automatic Exchange of Information (AEoI) on tax compliance using French tax records and foreign financial asset data. It first provides an overview of offshore asset ownership among French households, highlighting a concentration of wealth in foreign accounts among the top earners. The study then evaluates a 2019 intervention by the French tax authority, where taxpayers listed in foreign reports were reminded of their reporting obligations, leading to increased compliance across various income groups, except the top 0.01%. The paper also studies the causal effects of AEoI on tax compliance, exploiting the staggered implementation of AEoI across countries to compare taxpayers in early adopter countries with those in late adopter countries.

We document the increasing role of the offshore trusts in international wealth

management. Looking at investment in British real estate, one of the most popular international investment assets, we document a number of descriptive facts. First, the role of direct investment from domestic trusts has been increasing at lower rates in recent years. Second, the offshore trust is starting to become more important in the market, outperforming domestic trusts. Third, this investment exhibits patterns across prices and geography that are more in line with the investment patterns of tax haven shell companies than those of traditional trusts. The offshore trust is highly opaque and not subject to the transparency initiatives that aim at establishing the ultimate ownership of corporate structures. Our results cast doubt on the favourable tax treatment of trusts and the efficiency of international financial regulation which by and large ignores the offshore trust in its reporting requirements.

We assess Euro Area financial integration correcting for the role of “onshore offshore financial centers” (OOFCs) within the Euro Area. The OOFCs of Luxembourg, Ireland, and the Netherlands serve dual roles as both hubs of investment fund intermediation and centers of securities issuance by foreign firms. We provide new estimates of Euro Area countries’ bilateral portfolio investments which look through both roles, attributing the wealth held via investment funds to the underlying holders and linking securities issuance to the ultimate parent firms. Our new estimates show that the Euro Area is less financially integrated than it appears, both within the currency union and vis-à-vis the rest of the world.

This paper characterizes profit shifting behavior across the distribution of multinational groups and thereby provides three sets of results relevant for the recently introduced Global Minimum Tax (GMT). First, we establish the group-size cutoff at which MNEs change their production function to include the ability to engage in aggressive profit shifting. Second, we show how this cutoff coincides with an increase of internal debt within the group. Third, we show that this is connected with a decrease in effective tax rates of the MNE. Finally, we establish an indicator that correlates with our indicators of internal debt and lending to tax haven subsidiaries to allow researchers without access to detailed internal lending data to identify aggressive profit shifters.

A reform in the German state of Hesse selectively shifted the responsibility for overseeing and enforcing a balanced budget rule at the municipal level. This involved transferring the responsibility from a politically affiliated county administrator to a non-political and potentially more impartial fiscal supervisor at a higher administrative layer. We empirically examine if this change reveals biases that existed before this centralization of oversight. Our findings indicate that municipalities closer to the political supervisors reduced their cash loans more significantly and displayed lower deficits under the subsequent neutral supervisor. This suggests that geographically closer municipalities were treated preferentially by the politically affiliated supervisor. We find no systematic impact on the enforcement of the fiscal rule based on the political alignment between the supervisor and the mayor or the party ideology of the supervisor.

This paper investigates how political alignment affects the implementation of punitive welfare measures in the UK. In particular, we examine whether a legislator's party affiliation affects the rate of sanctions to unemployment benefits in the MP's constituency. We use a regression discontinuity design based on close elections to compare the sanction rates across constituencies that are marginally aligned or unaligned with the central government. We find that implementation of the sanction regime is significantly more lenient in constituencies won by the government parties. The RD estimate indicates a drop of .8 percentage points at the cut-off, implying on average 18 % lower sanction rates in Coalition controlled constituencies. Our findings suggest that legislators are able to influence national, rule-based policies, even within a highly centralized system. Such pork barrel politics that can undermine institutions that should be neutral to local partisan considerations.

We study how political competition and political alignment affect local policy initiatives using the case of the Korean local childbirth grant program, a one-time cash grant that a local government autonomously provides to a newborn’s family financed by its discretionary budget. Both political competition within the locality and political alignment between the central and local governments are expected to cause an earlier adoption of the grant because it is favored both by local voters and the central government. Results from a survival analysis provide supporting evidence for this view.

We investigate how institutions granting voters veto power over legislation or requiring durable legislative coalitions affect regulatory activity. In a difference-in-differences design with unique panel data from the Swiss cantons in 1908-2020, we estimate the impact of mandatory legislative referendums and second reading requirements on the number of changes to statutory enactments. Both institutions substantially reduce regulatory activity. In particular, the abolishment of mandatory legislative referendums increases regulatory activity by around 50 percent. Our results suggest that regulation tend to benefit narrow interests rather than voters at large.

Status or income rank matters to most of us. Rank is not a fixed characteristic, however: we could be doing well relative to neighbors, for example, but much less so relative to others in our occupation. We might be big fish in some ponds, but smaller fish in others, which makes the choice of a pond a decision with important welfare consequences. In this paper, we report on the results of a large-scale field experiment that first elicited the beliefs of a representative sample of mid-career Finns about their income ranks in various reference distributions and, in one condition, allowed them to choose which rank would be revealed to them, after which we collected a range of welfare and preference measures. We characterize the choice of reference population and its implications for individual well-being. Last, we compare the effects to cases where the reference population is assigned at random.

Surveys and experiments suggest that people hold workers more responsible for wage gains stemming from factors indicative of merit, such as education, than other factors. This paper shows how to design redistributive income taxes that account for workers’ merits. First, we introduce meritocratic social welfare functions that accommodate individual preferences and hold workers responsible for the part of their wage stemming from merit. Second, we show how to map primitives of these social welfare functions into empirically measurable statistics and exploit long-run comprehensive Norwegian income and family relations data to examine the relationship between merit and wages. Third, we simulate linear and non-linear optimal income tax implications of the meritocratic social welfare functions, given our measurement of the role of merits. The result shows that accounting for merit leads to lower optimal marginal income tax rates than the utilitarian criterion recommends.

The present paper analyzes optimal redistributive income taxation in a Mirrleesian framework extended with other-regarding preferences at the individual level. We start by developing a general model where the other-regarding preference component of the utility functions is formulated to encompass almost any form of preferences for other people’s disposable income, and then continue with four prominent special cases. Two of these reflect self-centered inequality aversion, based on Fehr and Schmidt (1999) and Bolton and Ockenfels (2000), whereas the other two reflect non-self-centered inequality aversion, where people have preferences for a low Gini coefficient and a high minimum income level in society, respectively. We find that other-regarding preferences may substantially increase the marginal tax rates, including the top rates, and that different types of other-regarding preferences have very different implications for optimal taxation.

This paper studies the consequences of charitable giving for both the optimal tax system and the optimal provision of public goods. In a setting where heterogeneous individuals can give to a variety of charitable causes, I first characterize the optimal grants that the government should allocate to different charities. I show that the desirability of such grants depends on the relative strength of warm glow compared to the cost of fundraising. Generally, preferences for public goods are not relevant for determining the necessity of grants. However, I provide a new Samuelson rule describing how warm glow, fundraising costs, and public good preferences collectively affect the optimal level of public goods. Second I derive new optimal nonlinear tax formulas for both income and donation that are robust to a wide set of microfoundations for both labor supply, public good preferences and donation behavior.

Few studies about value added tax (VAT) have examined business-to-business (B2B) transactions, and policymakers implicitly assume that VAT will be full-shifted. This paper investigates theoretically and empirically whether this is true. A system of input tax credit seems to allow firms to avoid the VAT burden. However, the determination of the transaction prices is left to the market, and taxation affects intermediate goods markets. We examine VAT pass-through in B2B transactions using the producer price indices in Japan. The October 2019 VAT increase in Japan covered almost all private goods and services, and prices in B2B transactions were subject to tax increases. We show that, despite the input tax credit, the tax is not fully shifted in B2B transactions. The degree of pass-through is more likely upstream of the transaction stage, whereas the pass-through is more difficult downstream closer to the taxpayer, the consumer.

We estimate the effect of a temporary and large (21 pp) VAT cut along with anti-profiteering measures on food necessities during a period of high inflation in Argentina. Using barcode-level data in over 3,000 supermarkets, we find that (1) absent the anti-profiteering measures, prices responded less to the VAT cut than its repeal resulting in prices that were higher than their pre-VAT cut levels; (2) imposing anti-profiteering measures resulted in symmetric pass-through rates. Using a household welfare model, we show that the VAT cut resulted in progressive welfare effects and that the anti-profiteering measures were successful at dampening the regressive welfare effects of the asymmetric pass-through. However, we show that these policies benefitted high-income households more because pass-through rates are more asymmetric in independent supermarkets, which is precisely where low-income households tend to shop the most.

We study the equity-efficiency trade-off of differentiated commodity taxation. When first introduced in 2017, India's General Sales Tax (GST) applied the highest tax rate of 28\% to many normal and luxury goods which were later reclassified to the 18\% tax bracket. We combine the sharp cuts in tax rates with administrative data at the firm-goods-month level, to estimate behavioral responses in a difference in difference design across goods. The 10p.p. tax cut led to a 5p.p. rise in sales and was mostly passed-through to consumers via lower prices. The sales of substitute goods hardly changed, even for multi-product firms selling both a treated good and a close substitute, suggesting a low re-labelling elasticity. These results challenge the common view that indirect commodity taxation is of limited use for redistribution: in countries where direct taxation is constrained, taxing luxury goods at higher rates might be desirable to achieve distributional goals while generating limited distortions.

The problem of tax incidence is of great importance for both the theory of taxation and the practice of shaping the relationship between taxpayers and the tax administration. Determining the extent of tax pass-through is important, for example, in the case of overstated or overpaid tax. In some countries, a prerequisite for refunding overpaid tax is to establish that the taxpayer has suffered a loss or damage from the undue tax and has not shifted the tax burden to its customers. The prevention of unjust enrichment of taxpayers follows directly from laws i.a. in Austria, France and the UK. The purpose of the article is to discuss how to understand tax pass-through and a loss or damage resulted from the payment of an undue tax and to determine how to calculate them so that the refund of overpaid tax to the taxpayer does not lead to unjust enrichment.

While quantifying the impact of corporate taxes on firms’ investment, location decisions and tax avoidance has attracted considerable interest over recent years, other corporate adjustment margins are less well studied. In this paper, we use rich customs and tax return information for South Africa to establish that corporate taxes impact firms’ competitiveness in international product markets. Drawing on a difference-in-differences strategy that allows us to non-parametrically absorb confounders at the level trading partner countries and 6-digit product categories, we show that exports by South African firms decline significantly when host country-corporate taxes of foreign competitors decrease. The effect emerges across a broad set of industries and is concentrated among large, regular exporters. Affected firms’ real activity and profits in South Africa drop significantly when foreign competitors’ corporate tax costs decline.

Credible corporate tax announcement allows the government to exploit its reputation and impose a high tax rate by attracting investment, but amplifies tax distortion on investment as firms become more responsive to the announced tax rate. While the latter effect is outweighed by the first effect in a general model of corporate taxation with government reputation, introducing firms' profit-shifting makes the latter effect dominant. Reputation is modeled as the probability of government committing to the announced tax rate, and the optimal tax rate decreases in reputation when firms can shift profits across countries. This induces higher investment and less profit-shifting under higher levels of reputation. The model predictions are consistent with empirical facts on how government reputation is related to statutory corporate tax rate, foreign direct investment inflows, and multinational firms' profit-shifting.

Rising globalization has exerted a downward pressure on global tariffs, thereby eroding tariff revenues in developing nations. We analyze how gains from lowering import tariffs are distributed within the firm and the corresponding tax (base) implications. First, we study the effect of tariff changes on imports. Second, we estimate the firm-level semi-elasticities of profits, sales, capital, and wages with respect to import tariffs. Using linked employer-employee data and firm-product-level import data for South Africa we find that lowering tariffs, leads to higher imports and lower import prices, raises within firm wage inequality and favors capital owners, while overall government revenues decline. The latter is attributable to the insufficient expansion of alternative tax bases (profits, sales, and wages) after a tariff cut. This limits the government's capacity to mitigate the adverse distributive effects arising from tariff reductions.

Developing country growth is expected to reduce aid dependence and mobilize domestic revenues (DRM) to finance public expenditure. Income status upgrades by the World Bank represent milestones in this transition and may anticipate a decline in aid precipitating an increase in tax collection to complement the shortfall in government revenue. Applying the synthetic control method (SCM) and synthetic difference-in-differences (SDID) to countries with sufficient data in the UNU-WIDER GRD tax database and the WDI, I investigate whether the income status upgrades raise government revenue in sub-Saharan African (SSA) countries. Robustness checks confirm findings of little impact, except for SSA countries ineligible to International Development Association (IDA) lending relative to other SSA countries, suggesting economic growth may not translate into DRM before the IDA eligibility threshold has been crossed.

This paper studies the effects of the minimum wage on the life cycle of firms. We first build a tractable model where heterogeneous firms have labor market power, invest in innovation, and choose formal or informal sectors. The model predicts that a minimum wage hike not only shrinks young firms but also lowers incentives to innovate, resulting in lower life cycle growth. We then test the model's predictions using Brazilian administrative data leveraging the variation in exposure across establishments and municipalities to the large increase in the minimum wage between 1999 and 2010. At the establishment level, an increase in the minimum wage: (i) decreases the growth rates of small and young establishments and (ii) increases the growth rates of old and large establishments. When analyzing exposed municipalities, we observe an increase in the earnings of workers in both the formal and informal sectors, as well as informal employment.

This paper studies the effect of prohibiting the use of cash for wage disbursements on labor markets in developing countries. We study a reform in Uruguay that mandated wage payments to be disbursed using only electronic methods. Using a difference-in-differences approach based on sector-level cash intensity prior to the reform, our results indicate that firms in high cash intensity sectors are significantly more likely to discontinue formal activities post-reform. Active firms show a slight reduction in the number of employees and an increase in reported wages. These results are driven by low productivity firms. Complementary results using survey data indicate an increase in informal employment and a decrease in collusive underreporting of earnings partially explain these results. Overall, results suggest that, while eliminating cash for wage payments enhances tax compliance among formal workers, it may also shift some economic activity into full informality.

Mobilizing domestic revenues is crucial for governments. However, in settings with low enforcement, this can be a challenging task. Fostering voluntary tax compliance among citizens is a promising approach for countries with limited state capacity. In this study, we examine public goods messages as a means to increase citizens' voluntary tax compliance. Specifically, we focus on the role of the message sender, comparing public goods messages transmitted by the tax authority to those transmitted by a religious leader. In a lab experiment conducted among market traders in Tanzania, we find that public goods messages conveyed by a religious leader are more effective than those conveyed by the tax authority. Nevertheless, governments must exercise caution when utilizing public goods messages, as in certain contexts, these messages can backfire, resulting in lower tax compliance. This effect is particularly pronounced when the sender of the message is a religious leader.

This paper investigates a neglected aspect of informality in Latin America—Payments Under the Table (PUT), where registered firms make off-the-books salary payments. We conduct the first multi-country large-scale survey on this topic, covering Brazil, Argentina, Mexico, Colombia, and Chile, being representative of over two-thirds of Latin America's population. Out of the more than 5,000 formal workers surveyed, our results indicate that 16% of them receive some part of their compensation under the table. Among PUT receivers, on average 24% of their labor earnings are paid off the books. We then provide insights into the mechanics and motivations behind PUT, exploring its impact on talent misallocation. The research highlights PUT as a potential driver for growth in developing countries, enabling less productive firms to retain skilled workers. By shedding light on this overlooked dimension, the study contributes to a more comprehensive understanding of informality's role in Latin American economic development.

We study how institutional wage reforms in one sector spill over to other sectors by analyzing the public sector.

We leverage the Japanese policy reform that cut public-sector wages only in certain municipalities and the institutional setting in which only young workers are eligible for public-sector jobs. We find that a 1% public-sector wage cut reduces the private-sector wages of young workers by 0.3%, with larger spillovers in municipalities with a larger share of public workers.

It also reduces the young population by 0.4%, suggesting a welfare decline based on spatial equilibrium and a decrease in private-sector labor demand.

What are the local economic impacts of foreign troop deployments? To answer this question, we exploit variation from the historical large-scale U.S. troop withdrawal from Germany at the end of the Cold War for identification. Administrative data by the U.S. Department of Defense enables the precise quantification of the shock at the municipal level. We find negative effects on local labor markets, which transmit to municipal finances. Revenues go down, which municipalities counter by decreasing their expenditures while increasing property tax multipliers. Long time-series enable us to show in a dynamic DID setup that these negative effects persist until today and often even increase over time. Persistently higher intergovernmental transfers allocated to affected municipalities alleviate the negative economic impacts.

Aging populations and labor shortages in skill-intensive sectors have led many countries to pursue targeted policies to attract international talent. We study a migration reform in Sweden that offered international doctoral students from outside the EU an easier path to permanent residency. Implemented in 2014, the reform shortened the required period of residence from eight to four years, allowed these students to obtain permanent residency immediately after graduation, and granted their spouses a work permit during their doctoral studies. Using the European students as a comparison group in a difference-in-differences design, we find that the treated international students are 13.5 pp (23%) more likely to stay in Sweden three years after graduation. Higher settlement prospects also increase their language investments and marriage rates during the PhD. In addition, the reform raises both employment and language investments among the partners of the treated international students.

This paper analyzes the effects of relaxing the residence status of foreign temporary workers to have some children and to live continuously in the host country when they are retired. It is argued that immigration may have indirect negative effects, for example, imposing the additional burden of educating foreign worker children who require additional support to master the culture, customs, and language in the host country. The findings indicates that the relaxing policy can improve the welfare of the natives. This is because relaxing residence rights imposes an additional educational burden on native residents and leads to a shift of native workers from the consumption sector to the education sector, resulting in a relatively higher capital-labor ratio in the consumption sector.

This paper studies the effects of Finnish first-time homebuyer’s transfer tax exemption on the propensity to become a first-time home buyer. Under certain conditions a first-time buyer may be exempted from a transfer tax rate of 2% or 4% depending on the dwelling type. Using administrative data on housing company shareholdings, property taxes, and Finnish population, I exploit a discontinuity in the eligibility rules at an age threshold. My RD estimates suggest that the tax exemption may increase first-time housing company dwelling purchases by 16\% or more at age 40.

Using household survey data for South Korea, we examine heterogeneous impacts of recurrent property taxes on consumer spending. To identify unexpected changes in these taxes, we exploit the unique feature of the South Korean recurrent tax system. Specifically, while the government re-assesses the value of individual houses annually, their assessed value, which constitutes the tax base, deviates from the market value non-systematically, so that every year there is an element of surprise to individual house owners in the amount of recurrent taxes payable. Our main results are threefold. First, an increase in recurrent taxes reduces consumption of households with low liquid asset balances relative to disposable income in particular. Second, higher taxes reduce those households' spending on durable goods more than non-durables. Third, higher taxes lower the probability of multi-house owners buying an additional house for investment, helping curb excessive house price growth.

Beginning in 2018, the amount of state and local tax (SALT) that can be claimed as an itemized deduction is capped at $10,000. Previously, there was no cap on this deduction. The cap is expected to reduce the share of taxpayers who itemize deductions, and to raise the net-of-tax price of charitable giving. This effect is not uniform across geographic areas. In locations with initially low state and local taxes, the cap is not binding for many. This paper makes use of geographic variation to investigate whether the introduction of the SALT cap is associated with a reduction in gifts made to charitable organizations. Analysis of household-level data suggests that high-SALT households reduced their giving relative to low-SALT households. Analysis of organization-level data from IRS Form 990 suggests that charitable organizations located in counties with initially high SALT deductions experienced a relative decline in contributions after the tax change.

We take advantage of a unique experiment to study how saving responds to wealth shocks. Following the collapse of Iceland's banking system in 2008, authorities decided on a program of mortgage relief, financed by foreign creditors, that in effect lowered the principal of mortgages overnight in 2015, many years after the end of the economic crisis when household balance sheets had been repaired. Using administrative data on all taxpayers in the country, we measure the effect of the mortgage relief on the saving of every taxpayer in the country using households that were not eligible for debt relief as a control group. Although a negative effect of wealth on saving could have been expected, households amortized even more in response to the debt forgiveness. The increased amortization is not only due to lower interest costs, but also due to higher saving, mostly by highly leveraged and liquidity constrained households.