This paper investigates to what extent multinational enterprises relocate jobs internationally in response to taxes. The analysis uses detailed data on employment and investments of foreign multinational enterprises within the United Kingdom combined with tax reform variation in the country of the MNE headquarter. Preliminary analysis shows that labour taxes are important for the international location of jobs within the MNE.

This study analyzes the implications of tax complexity for the structure of tax departments and tax risk. Using a hand-collected dataset of more than 7,500 tax department employees from 353 European listed multinational enterprises, we identify two potential sources of costs associated with tax complexity. First, we find that firms locate more tax department employees in countries with a high level of tax complexity. This association is particularly pronounced for high levels of complexity in the tax framework, such as tax filings, audits, and appeals. Second, we find that investments in high-tax complexity countries are associated with a higher tax risk than investments in low-tax complexity countries. However, this tax risk is lower for multinational firms with more tax department employees in these countries. Our results suggest that installing tax department employees in highly tax-complex countries is crucial in effectively managing tax risks.

The location choices of multinational enterprises (MNEs) can significantly impact economic outcomes and are therefore of significant relevance for policy makers and a frequent topic of public debate. At the same time, individual MNE affiliates can fulfil various functions. This paper explores the role of corporate taxation in the allocation of functions within the MNE value chain using new comparative cross-country data on MNE functions taken from the Country-by-Country reporting (CbCR) data. The paper first provides an extensive description of the distribution of functions within MNEs and reveals striking differences in the functions of affiliates located in investment hubs versus non-hub affiliates. Second, the paper explores the tax-responsiveness of different MNE functions.

We examine whether tax-aggressive firms respond differently to interest limitation rules (ILRs) compared to the non-aggressive ones and whether, given the election right, the former prefer a certain type of ILRs (safe haven approach that restricts internal debt ratio versus earnings stripping rules) in order to maintain their tax-aggressive status. We exploit a quasi-natural experiment provided by the introduction of a hybrid system of ILRs in Poland. We use a unique data set consisting of micro-level information from tax authorities matched with Amadeus and complemented with more granular data from individual financial statements. We apply triple difference and logistic panel regressions. We do not find that the leverage responses of tax-aggressive and non-aggressive firms are statistically different among these two groups. However, the regressions based on tax return data show that tax-aggressive firms are more likely to escape earnings stripping rules and choose the traditional safe haven approach instead.

This paper studies the impacts of limiting interest deductions on firms’ investment and financing choices using U.S. tax data. The 2017 law known as TCJA implemented an interest limitation for big, high-interest firms. Using an event study design comparing big and small high-interest firms, we rule out economically significant impacts of the limitation on investment and leverage, and find evidence that the it led firms to increase equity issuance. A triple difference design that accommodates size-varying impacts of other policy changes yields similar results, as does a regression discontinuity design focusing on marginal firms just large enough to face the limitation. Our results indicate many firms do not use debt as their marginal source of financing and provide evidence consistent with capital structure models with fixed leverage adjustment costs. Furthermore, they suggest limiting interest is unlikely to have large impacts on investment or address concerns about rising corporate debt levels.

Understanding how the tax rate elasticity varies across the distribution is crucial for determining optimal taxes. In Mexico City, a 1% increase in the property tax liability is associated with a 7 times larger reduction in compliance amongst the wealthy than the poor. Unlike similar findings for the elasticity of taxable income, this is not because the rich are able to access certain evasion / avoidance technologies, such as transferring labour to capital income. The results are also not explained by differences in the strength of enforcement across the distribution, or because tax rates are higher at the top. In other words, it seems that the rich are ’fundamentally’ more sensitive to tax rates than the poor. Higher elasticities at the top of the distribution mean that the optimal tax structure will be less progressive.

This paper investigates how wealth taxation affects households' portfolio choices. Leveraging a major wealth tax reform introduced in France in 2017, I estimate the degree of substitution between real estate and financial wealth. To identify causal effects, I use comprehensive administrative-linked income and wealth microdata for France and a difference-in-differences design comparing French residents to non-French residents subject to the wealth tax but not affected by the policy change. Five years after the reform, the stock of real estate held by French taxpayers decreased by an average of 6% This decrease in real estate is driven by investment rather than owner-occupied housing and is mirrored by a surge in dividend income. The reduced-form estimates can be converted into a cross-elasticity of 5: a 1 percentage point increase in the tax rate differential between real estate and financial assets leads to a 5% reallocation of households' housing stock to financial assets.

In Uganda, the revenue authority launched a unit to monitor the tax affairs of the richest, both high net-worth individuals and very important people. We evaluate the impact of such policy on tax filing and payment outcomes of targeted taxpayers, with a standard difference-in-difference framework. We show that the policy has been only partially successful. While the unit increased the probability to file, especially of VIPs, it produced a strategic response by which taxpayers declare less on different margins, with no impacts on tax liability. On tax payments, only a small impact on tax collected is measured, again due to complex offsetting responses across tax heads. Importantly, we also measure the spillover effect on companies associated with the richest – documenting again complex compensating reactions and no meaningful impacts. Lastly, we show that, while deterrence is more effective on HNWIs, taxpayer assistance and public shaming are more relevant for VIPs.

Understanding behavioral aspects of collective decision-making is an important challenge for economics, and narratives are a crucial group-based mechanism that influences human decision-making. This paper introduces the Character-Role Narrative Framework as a tool to systematically analyze narratives, and applies it to study US climate change policy on Twitter over the 2010-2021 period. We build on the idea of the so-called drama triangle that suggests, within the context of a topic, the essence of a narrative is captured by its characters in one of three essential roles: hero, villain, and victim. We show how this intuitive framework can be easily integrated into an empirical pipeline and scaled up to large text corpora using supervised machine learning. In our application to US climate change policy narratives, we find strong changes in the frequency of simple and complex character-role narratives over time.

Does information influence policy support? We administer a large-scale representative survey with randomised video treatments to test how different policy frames affect citizens’ attitudes towards urban tolls in two large European metropolitan areas without tolls, Berlin-Brandenburg and Paris-Ile de France. Providing information on air pollution increases support by up to 11.4%p, information on climate change and time savings increase support by 7.1 and 6.5 %p, respectively. Treatment effects are stronger in the Paris region, where initial support is lower. We also investigate treatment effect heterogeneity across different socioeconomic characteristics as well as by prior beliefs held about the severity of environmental and traffic problems, and we find weak spillovers of our treatment on the support of other policies. Our findings imply that targeted communication of policy co-benefits can increase policy support across different population groups.

We present a theory linking political and social trust to explain trust erosion in modern societies. Individuals disagree on the seriousness of an externality problem, which leads to diverging policy opinions on how to solve it. As a result, disappointment with the policy rule enacted by the government breeds institutional distrust. Individuals who are more worried blame the government because the rule is too lenient. The less worried blame it because they find the rule too intrusive. Second, this heterogeneity in individuals' concern levels also fuels social distrust. The more individuals are worried, the more they distrust others who are not complying with the rules. Our experimental survey conducted in four European countries shows how these trust dynamics came to the surface during the Covid-19 pandemic. We also find that support for the welfare state erodes alongside sliding trust levels.

We study a repeated interaction between the purchaser of a health service and a nonaltruistic provider when some aspects of the service are unverifiable or verifiable. We formalize a Pay-for-Performance Relational Contract (P4P-RC) inducing the provider to deliver positive unverifiable quality. With the P4P-RC contract, the incentive of the provider to cheat on the unverifiable (non-contractible) quality makes the purchaser less willing to substitute away unverifiable with verifiable quality. Using political stability as a proxy for a stable interaction, we empirically test the relationship between the level of unverifiable quality and the permanence in charge of the Italian regional governments. We confirm the predictions of the theoretical model and find that unverifiable quality increases in contexts where regional governments are more stable.

This article examines health service provision and disparities in access, focusing on the interplay of tax deductions and the spatial correlation between health demand and private supply. We make two main contributions using detailed municipal-level data and a spatial counterfactual empirical approach. First, we uncover significant territorial variations in health tax expenditure, favouring northern Italian regions over southern ones. Second, we explore how proximity to private versus public health providers influences citizen spending behaviour, particularly in the Italian context. Our geographically weighted analysis reveals strong spatial non-stationarity, highlighting local factors affecting healthcare provision.

Public agencies often take long to pay their suppliers for the goods and services they procure. The payment delay can financially burden firms, affecting their participation and pricing decisions. In this paper, we study a reform in Chile that centralized procurement payments and substantially reduced payment delays for certain buyers in the health sector. We utilize a differences-in-differences design to evaluate its effects. Our preliminary findings suggest that reducing payment delay increased competition in procurement auctions by enhancing the participation of small firms, which is consistent with a model under which liquidity-constrained (smaller) firms face higher financial costs from delayed payments.

This paper investigates how commercial trucks respond to differences in environmental taxes on diesel fuel across European borders. First, we analyze truck flows at German borders using administrative toll data to understand how truck traffic reacts to changes in environmental taxes. Second, we examine individual truck journeys across Europe from their start-to-end-points using administrative survey data to assess whether trucks drive detours to avoid high environmental taxes. We find that an increase in a country’s tax rate decreases truck traffic to and from that country. However, this increase in taxes also heightens the probability of trucks taking detours to circumvent higher environmental taxes on fuel. We further investigate the environmental impacts of such tax-induced responses. We use air pollution data to determine whether local pollution increases due to tax-induced increases in cross-border truck flows. In addition, we relate the estimated excess kilometers driven to emissions to measure the environmental externalities.

This study presents preliminary evidence that the European Emission Trading Scheme (EU ETS) is exploited by multinational companies to artificially shift profits between European countries. Specifically, using the EU transaction log and Orbis ownership data, I highlight abnormally high levels of internal trade in emission allowances at year-end—despite the April surrender deadline -- within firms under the same Global Ultimate Owner (GUO). This activity is especially marked in transactions involving firms without actual emission certificate needs. Towards the year-end, allowances are moved from subsidiaries in strict accounting jurisdictions to those in lenient ones, indicating regulatory arbitrage. These patterns hint to a potential misuse of the EU ETS for financial manipulation rather than emission reduction. I hope to add further analysis, in particular related to the market price of allowances, to contribute to ensuring the EU ETS remains an effective tool for environmental objectives without facilitating unintended financial exploitation.

This paper studies the economic and environmental effects of a landmark piece of environmental legislation: the Clean Air Act. We improve the understanding of the effects of this important environmental regulation in three ways. First, we use modern event-study techniques and confidential data from the US Census Bureau to estimate the long-run impacts of the regulation on plant output, employment, and fuel use. Second, we identify two forms of spillover effects: (a) regional spillovers to unregulated areas and (b) within-firm spillovers to unregulated plants in regulated firms. We find both larger long-run effects on the economic activity of regulated plants as well as meaningful spillovers effects both within firms and across locations. Our third contribution is to combine these new results with an industry equilibrium model that captures both within-firm and cross-location spillovers of the regulation.

Using registry data on over 300,000 firms in Korea, we examine the effects of subsidizing payroll tax to the National pension and the Unemployment insurance on the number of covered workers. Exploiting variations in location and size of firms which affected eligibility for the program, we implement a difference-in-differences in order to identify the effect of subsidies. Our DD estimates show that the subsidy program increased the number of workers covered by the National pension by 1.34 percent. In contrast, we find no effects of the subsidy program on the number of workers covered by the Unemployment Insurance. These estimates are smaller in size than those reported in previous studies implying massive fiscal drains from the subsidy program. The minimal effects and large deadweight of the subsidy scheme may be explained by the design features of the subsidy program in Korea.

This paper studies the incidence of payroll taxes and the effects of payroll taxes on the input choices of firms. We exploit the abolition of size-based capital depreciation threshold in Finland above which employer-level payroll tax rates increased, creating a tax notch. We report large local impacts on firm distribution and dynamics, which also extend very far from the threshold. Our results indicate that these responses are not driven by the most obvious avoidance or evasion channels, such as firm splits or misreporting. Our first results suggests only a small response in employee-level net-of-payroll-tax wages. Instead, we find large firm-level employment effects. Our first incidence estimates suggest 43–57 split between firm owners and workers, respectively. Also, investments and sales increase after the payroll tax cut, suggesting that a decrease in labor costs affects the level of capital and scale of businesses.

Short-time work is a government program that subsidizes reductions in worker's hours during temporary and unexpected economic shocks. Despite growing evidence showing positive employment and firm survival effects, yet unsettled is the evaluation of the policy welfare consequences, especially fiscal externalities from opportunistic behaviors of firms. Through theoretical and empirical analyses, this study examines the impact of financial disincentives on short-time work adoption, layoff, and job openings behaviors. On the theoretical side, it extends the random search and matching framework of Cahuc, Kramarz, and Nevoux (2021). It applies it to Belgium, where experience rating in short-time work binds if firms allocate subsidized hours above a given cutoff to a single job. To provide compelling causal evidence on firms' behavioral responses to experience rating, it relies on rich administrative data on short-time work in Belgium. It leverages a bunching estimator and discontinuities in experience rating costs to firms.

This paper presents a conceptual framework for a satellite account for the measurement of the size and structure of tax evasion and avoidance and its impact on public finance. It represents a first attempt at the creation of a unifying reporting framework for all kinds of fragmented evidence on tax evasion and avoidance, departing from the adjustments made to GDP estimates in order to account for the non-observed economy, which is distinct from the undeclared economy. The paper defines the scope of the satellite account, framing the discussion within a broad definition of fraud considering the impact on both sides of the public budget, and anticipates some conceptual differences. Finally, it reviews different strands of literature in order to provide a classification of fraud phenomena, provides an outline of the tables to be compiled and indicates some of the data sources available at the international level.

We develop a dynamical model that includes not only corporate tax revenue losses due to profit shifting of multinationals, but also tax revenue collected from capital gains and dividend taxes, as well as government borrowing costs. We use country-by-country reporting data on the operations of multinationals to estimate profit shifting, alternative operationalizations of the location of investors to proxy the tax revenues from capital gains and dividend taxes, and yields on government bonds to measure the cost of borrowing. Our results show that when these indirect costs are included, the total cost of profit shifting for developing countries increases significantly, while some developed countries can offset or recover the majority of the direct costs of profit shifting. The ability of the latter to do this is, however, uneven, with, for example, most European countries losing revenues from profit shifting even after indirect effects are taken into account.

This paper investigates the association between the effectiveness of mutual agreement procedures provided for in bilateral tax treaties (MAP) and foreign direct investments by analyzing MAP statistics and distinct MAP components. Using firm-level ownership data, we find that MNEs invest more frequently in countries with good MAP policy structures and qualities (e.g., MAP components and fast dispute resolution). Vertically integrated MNEs and small parent MNEs most favor countries with several effective MAP components. Overall, we provide novel evidence on MNEs’ investment responses to effective MAP, evidence that is crucial for policymakers who aim to reduce tax disputes and double taxation.

We analyse whether there exists a first mover and/or a second mover (dis)advantage in a game where a more industrialized country -the leader- and a less industrialized country the follower- decide on two policy instruments (prot taxation and environmental regulation) to raise their tax income while limiting the damage from pollution. We show that when governments care about world emissions, they can use a sequential game to reach their national goals and reduce the level of world emissions, even if industrial leakage occurs. This is no longer the case when emissions are considered solely as local.

This article explores whether altruistic preferences for households in poor countries contributes to avoid the free-rider problem associated with global warming policies within non-cooperative solutions. The article analyzes optimized carbon taxes on commodities within rich countries with altruistic preferences when damage inflicted upon poor countries are accompanied with foreign aid. The article contributes to the literature by identifying two cases where the second-best optimized carbon tax for rich polluting countries exceeds the marginal damage inflicted on poor countries. First, when rich countries place a higher welfare weight on environmental damage than on economic well-being within poor countries. Second, when second-best optimal revenue raising taxes are combined with foreign aid. The article also identifies cases where the Pigouvian tax implements the social planner solution. Hence, altruistic preferences and foreign aid contributes to avoid the free-rider problem.

Child care in the United States is usually described as a fragmented system, where public programs interact with private organizations to supply childcare services. In this paper, I analyze the effects of an expansion of subsidized childcare for low-income 4-year-old children, the North Carolina Pre-Kindergarten Program (NCPK), on the enrollment of 0-4-year-old children. I combine rich data from administrative records with a design that exploits geographical and temporal variation in the NCPK rollout. I found that, when joining the program, NCPK centers enrolled more children and reorganized their structure to serve more eligible children. Nearby childcare facilities also enrolled more four- and three-year-olds, particularly in lower-income areas. This is most likely explained by the displacement of ineligible children from NCPK to non-NCPK centers. The results suggest that the policy increased childcare access for low-income families and led to a reallocation of children to centers, increasing economic segregation across centers.

Parental leave is one of the most important policies that shape the post-birth careers of women. We exploit a sequence of parental leave reforms in Germany that extended both the job protection period and the duration of parental leave benefits to different extents to study the effects of the two policy instruments parental leave consists of. Using administrative social security data, we first replicate the stylized facts that mothers respond to extensions in parental leave and that the average effect of longer leave-taking on their careers is negative. Second, holding constant the length of mothers' post-birth labor market break, we show that extending job protection significantly reduces losses in long-run earnings while extensions of the benefit duration have no measurable impact. The positive effect of employment protection works both by enhancing employer continuity as well as by improving outside opportunities for mothers who change their employer.

We assess the impact of daycare enrollment on how housework and childcare are shared between mothers and fathers. Utilizing survey data from a Japanese municipality and observing all key variables influencing daycare enrollment, we employ a quasi-experimental approach to infer causal relationships. Our findings reveal that daycare enrollment leads to greater involvement by fathers in housework and childcare, concurrently with a reduction in mothers' participation in these areas. Notably, the shift in household labor dynamics appears to stem primarily from a direct influence of daycare enrollment on fathers' behavior, rather than from an increase in maternal employment.

Terrorism imposes substantial economic costs on affected populations. In this paper, we argue that conventional studies on the costs of terrorism overlook a crucial factor: costly behavioral responses. We demonstrate that terrorism alters the risk attitudes of individuals in affected regions. Using a representative German sample, we utilize a staggered difference-in-differences (DiD) design comparing individuals in counties impacted by terrorism with those unaffected. Results indicate an immediate and significant decrease in risk propensity post-attack. The magnitude of this effect is influenced by news sentiment; more negative reporting amplifies the impact on risk attitudes. Additionally, we observe happiness as a potential mediator in the relationship between exposure to terror attacks and risk attitudes.

We aim to understand whether language causally affects people's attitudes towards private and public debt. We provide descriptive evidence along the German/French language border running through Switzerland and causal evidence from online survey experiments in Austria, Germany, Switzerland, the Netherlands, and Sweden. The experimental component of our research design consists of the randomization of wording in our outcome questions. Exploiting the fact that the commonly used word for ``debt" also means ``guilt" in German, Dutch and Swedish, we analyze how respondents' attitudes towards private and public debt are affected if those negatively connotated words are substituted with neutral ones. Our results confirm our main hypothesis that the use of guilt-connotated wording triggers lower approval for public debt and lower borrowing in an incentivized investment decision. Finally, we provide evidence that language is strategically used in the political arena using natural language processing and machine learning techniques on parliamentary speeches in the German Bundestag.

While the impact of adverse health shocks and the factors influencing charitable giving have been widely studied, research that combines these topics, especially focusing on a specific disease, is limited. Using a staggered treatment setup and Swedish register data, this study examines "ingroup altruism born of suffering": whether cancer patients are more inclined to donate to cancer charities and if they donate more. The results show a significant increase in the probability of donating to cancer charities after a diagnosis, a decrease in donations to non-cancer health charities, and no impact on non-health charities. Overall charitable giving increases significantly, mainly driven by donations to cancer charities. This pattern is consistent for both the probability and amount of giving. Additionally, donations to cancer charities continue to increase over time post-diagnosis, although the rate of increase slows down.

We study the optimal recycling of carbon tax revenue in a Mirrleesian economy. Our starting point is a tax schedule that optimally trades-off equity and efficiency (for some welfare weights). If then the government has to implement a carbon tax (e.g. because of the Paris agreement or because suddenly it becomes aware of climate change), what should the government do with the additional tax revenue? We characterize reforms of the nonlinear labor income taxes that fully compensate for the individual utility losses from carbon taxes, neutralize the negative labor supply incentives due to Carbon taxes and are budget neutral. We label these reforms as compensating tax reforms. If Engel curves are linear, these tax reforms are also the optimal response. If Engel curves are nonlinear, they are no longer optimal because the fact that households differ in how easy they can substitute carbon consumption, affects the governments preference for redistribution.

We develop a quantitative growth model with directed technical change to study how material use and recycling rates respond to resource scarcity. In a static economy, scarcity naturally induces greater circularity, i.e. lower material shares and higher recycling rates. On the balanced growth path, circularity depends critically on technology parameters and policy. Indeed, short- and long-run policy implications can be quite different: taxes on virgin material extraction raise recycling in the short run and lower it in the long run. We quantify the model by combining data from U.S. material flow accounts, production (NIPA) accounts and U.S. Environmental Protection Agency (EPA) data on waste generation and recycling. Absent further policy, the recycling rate will peak at 48% around 2060 and then decline. Achieving the EPA target of 50% recycling rate by 2030 would require a 50% tax on virgin material use or a subsidy covering 66% of recycling costs.

Formulating and implementing climate policy requires a detailed understanding of likely pathways of future carbon emissions. However, most existing tools to provide forecasts for such emissions are limited. Projections are predominantly made for the long-term, lacking the necessary detail within the typical policy horizon of one to five years. Most short-term forecasting models are closed-source ‘black-boxes’ that do not reveal in detail how the obtained forecasts are generated. Here we develop a generalised framework for modelling climate and environmental policies within an empirical macroeconometric modelling approach. The resulting open source empirical macroeconomic (‘OSEM’) model is an econometric model builder that provides a platform to generate empirical forecasts of sectoral carbon emissions as well as the wider macroeconomy. The underlying estimated models are based on dynamic time series regressions matching a structural VAR allowing for model selection, outliers, insample structural breaks, and automatic forecast evaluation. We present an illustrative example providing

the first short run sectoral greenhouse gas emission forecasts for Austria. The resulting model builder is open source, easily portable across countries, can be updated in real time when new data is released, and aims to improve transparency and flexibility in policy forecasts.

Various nations combat transportation-related environmental effects through fuel efficiency standards and subsidies for hybrid/electric vehicles. Similarly, energy ratings aid consumers in making informed choices for large appliances. Extending this idea to automobiles, a labeling system could inform buyers about environmental impacts, potentially influencing demand akin to environmental subsidies. Israel's 2009 reform, assigning automobiles a "green score" dictating differential taxes and mandated reporting, prompted consumers to favor less environmentally damaging vehicles. About 75% of the shift resulted from price reductions, with information provision accounting for the remaining 25%. Notably, subsidies were less likely to impact models favored by lower socioeconomic groups, indicating the reform's regressive nature.

To show whether tax avoidance makes large firms even larger, we exploit the impact of the country-by-country reporting reform on multinationals in a difference-in-differences approach. We find that increased tax compliance following the reform reduces the size of large multinationals. Specifically, a one percentage point rise in effective tax rates results in a 2.3% decrease in sales. We also show a sales decline in subsidiaries owned by multinationals subject to the reform compared to those exempt; and a decrease in concentration in industries where the top firms are subject to the reform. These findings highlight the potential of tax compliance reforms in fostering competition.

This paper investigates the response and welfare implication of firms to a size-dependent enforcement policy using Expend Paper Review (EPR) in Taiwan. With the policy threshold at 30 million New Taiwan Dollars (NTD), firms are incentivized to lower reported revenue via under-reporting (evasion), revenue-shifting (avoidance), or production reduction. Leveraging a novel combination of detailed tax returns and census survey data, our empirical focus examines how firms strategically bunch below the threshold, displaying diverse behavioral responses shaped by transaction tractability. Downstream industries mainly under-report B2C transactions, decreasing reported revenue by 0.56 million NTD. Conversely, upstream sectors reported lower revenue by 1.1 million NTD. Of this, 50\% was due to production reduction, highlighting misallocation sources and associated efficiency loss. Another 40\% is primarily contributed to B2B revenue-shifting among affiliated firms within ownership networks. Structural welfare estimation further implies that size-based tax enforcement has a broader impact on real economic efficiency beyond revenue considerations.

What can organizations do to minimize wasteful year-end spending before the annual budget expires? I introduce a two-period model to derive the optimal budget roll-over and audit rules. A principal tasks an agent with using their budget to fulfill the organization's spending needs, which are private information of the agent. The agent can misuse funds for private benefit at the principal's expense. The optimal rules are to allow the agent to roll-over a share of the unused funds, but not necessarily the full share, and in most cases to audit only sufficiently large spending. The shape of the optimal audit rule can change once fund roll-over is allowed, so the model has important implications for auditors. An extension with endogenous budget levels shows that strategically underfunding the agent can be optimal.

We leverage discontinuities in Poland that quasi-randomly determine unemployment benefit levels and duration. we report three main findings: (1) The distortionary effects of benefit increases are larger than those of cost-equivalent benefit extensions. (2) The distortionary effects of benefit duration and benefit generosity \textit{interact}: The unemployment effect of generosity nearly doubles when benefit duration is extended. And (3), in addition to delaying re-employment, more generous benefits significantly increase the hazard that employed workers become unemployed. We use the results to build a model of optimal unemployment insurance that accounts for moral hazard among the employed.The results suggest that the total distortion of UI among the employed is larger than that among the unemployed. Accounting for endogenous separations increases the efficiency loss induced by an increase in the benefit level substantially.

This paper estimates the extent of adverse selection and moral hazard in social insurance for entrepreneurs using rich administrative data and exogenous variation from Finland. We use a reform that allows certain entrepreneurs to freely choose their level of insurance contributions. We use this reform along with a difference-in-differences approach to implement empirical tests of adverse selection and moral hazard. First, we find evidence of no moral hazard effects when considering whether entrepreneurs who opt into higher levels of social insurance tend to use it more. Second, by considering whether entrepreneurs with higher pre-reform risks select into higher levels of social insurance, we find no evidence of adverse selection. These findings are important for the design of social insurance for entrepreneurs.

To control the illicit cigarette market, the government adopted a Tracking and Tracing System (TTS) for many excisable goods including cigarettes. Though the TTS was implemented in 2021, it became operational in July 2022, because of numerous legal and market challenges. Despite these roadblocks, the TTS has been mostly successful and by December 2023, most tobacco companies had either installed TTS or registered their brands with the tax authority.

This paper evaluates the impacts of the TTS on the size and types of illicit trade in tobacco products. We collect cigarette packs from waste recycled stores in the 10 most populous cities of Pakistan to evaluate illicit trade penetration. We also compare the results with a similar study using the same method and completed prior to the TTS. This is the first independent estimate of the proportion of non-complaint cigarette packs consumed in urban areas of Pakistan since the implementation of TTS.

We conducted a nationally representative volumetric choice experiment (VCE) of 700 US adults aged 21+ who vape ECs in the past 30 days during April-May 2023. Each participant reported their spending on nicotine or tobacco products and was asked to make purchases for monthly use among 9 sets of products, Zero-inflated negative binomial models were used to estimate the own- and cross- price elasticities among these products, while controlling for individual-level spending and sociodemographic characteristics. Increasing prices reduces the purchases of nicotine or tobacco products among US adults who vape ECs. Increasing EC prices likely did not lead to increasing cigarette purchases among people who vape ECs. However, this result depends on model specifications and subpopulations, such as EC-cigarette dual use status. Future research is needed to inform the best design of EC taxes by EC models and components, given their complex economic relationships.

Substance rules aim to ensure anti-tax avoidance rules do not target genuine economic activities. This paper empirically analyses whether the requirement to have economic substance leads to an increase in real investment in low-tax jurisdictions. The baseline results indicate that Controlled-Foreign-Company rules decrease investment in fixed assets and employment in low-tax jurisdictions. This effect is offset when the Controlled-Foreign-Company rule allows an exemption through substance rules. The results support the idea that multinational enterprises exploit leeway in CFC rules through increasing substance, which allows them to continue shifting profits. Additional analysis shows this effect is three times as large in EU tax havens, suggesting that it is more attractive to increase substance in tax havens that have real economic activity

While profit-shifting practices by multinational enterprises have received considerable attention in recent years for their impact on tax revenues, their real economic consequences remain poorly understood. In this paper, we use administrative data for the universe of Norwegian firms and workers to study employment responses to aggressive tax planning. We exploit variation in the timing of establishing corporate ownership presence in a tax haven to show that tax haven use is associated with lower employment growth. The granularity of the data allows us to uncover heterogeneity across worker groups, with the negative effects being strongest for service-sector employees in the highest occupations. In examining the potential of tax avoidance to shape labor market outcomes, this paper highlights the need for a more nuanced understanding of the socioeconomic implications of profit shifting beyond foregone government revenues.

This paper offers the first detailed characterization of the labor market in a tax paradise and investigates the impact of a reform aimed at discouraging tax avoidance on different employment margins. Our findings reveal that incumbent workers, who were relatively few compared to profits, had high levels of education, performed specialized tasks, and earned a wage gap, particularly at the top. Immediately after the reform announcement, they experienced an increased probability of exiting, largely due to the exit of firms. Stayers became more likely to accumulate jobs across several firms and saw an increase in wages, representing a small cost relative to firms' fiscal benefits. New workers who moved post-reform earned wages that were, on average, 30% lower than incumbents and were over 30 percentage points more likely to be on temporary contracts. These results provide valuable insights into policies aimed at increasing economic substance in low-tax jurisdictions.

We examine how the introduction of Controlled Foreign Company (CFC) rules by the Anti-Tax Avoidance Directive (ATAD) in the European Union impacts multinational enterprises (MNE). Using firm-level financial data and a difference-in-differences research design, we study whether the implementation of CFC rules in the context of the ATAD alters MNEs’ location, financial and economic activity decisions. Our results reveal that the newly implemented CFC rules were only partly effective in reducing income shifting. While the share of CFC subsidiaries decreases, the financial income of the persisting subsidiaries remains largely unchanged. Moreover, we observe positive effects on the costs of employees assigned to a CFC subsidiary, suggesting that the economic activity exemptions introduced by the ATAD allows MNEs to circumvent the rules by opting for a simple approach of enhancing economic activity in these locations.

Recent evidence documents that (a) parenthood lowers women’s earnings in the long

run and (b) the income loss due to children explains a large part of the gender inequality in earnings. Combining German administrative data ranging from 1949 to 2015 with quasi-experimental variation, we study the dynamic impacts of parental leave policies on women’s earnings trajectories. In the first part of the paper, we confirm the substantial and persistent effects of parenthood on mother’s careers: Due to children, mothers earn roughly 55% less compared to fathers or women without children, even ten years after birth. Furthermore, the child-related earnings gap increased substantially from the 1950s to the early 2000s. In the second part, we exploit a dynamic regression discontinuity design to demonstrate that a large share of this increase in eqrnings gaps can be explained by a sequence of parental leave reforms.

Does public policies affect norms in society? Traditionally, economists have analyzed public policies almost exclusively through their effect on (economic) incentives, but in the context of child rearing, incentives appear to explain only a minor part of the behavior of parents. In this ongoing project, we ask to what extent earmarked leave affects parental norms, preferences and attitudes towards gender equality in the short and long run? Whether earmarked leave alleviates non-standard constrains such as concerns about breaking social norms and perceived career costs of leave? And whether earmarked leave imposes costs on parents due to, e.g., less flexibility in the parental leave system? We address these questions by combining rich register data with a population wide survey of beliefs and perceptions about gender norms and parental leave of new parents running across a two-year window around the introduction of earmarked leave in Denmark in August 2022.

Using Austrian and Danish administrative data, we examine the impacts of parenthood on mental health equality. Parenthood imposes a greater mental health burden on mothers than on fathers. It creates a long-run gender gap in antidepressant prescriptions of about 93.2% (Austria) and 64.8% (Denmark). Further evidence suggests that these parenthood penalties in mental health are unlikely to reflect differential help-seeking behavior across the sexes or the biological effects of giving birth to a child. Instead, they seem to mirror the psychological effects of having, raising, and investing in children. Supporting this interpretation, matched adoptive mothers (who do not experience the biological impacts of childbirth) also encounter substantial parenthood penalties. Moreover, mothers who invest more in childcare (by taking extended maternity leave in quasi-experimental settings) are more likely to face mental health problems.

Optimal parental leave benefit design requires understanding how different parental leave parameters impact individual behavior, costs, and welfare. Using administrative data from Italy, this paper leverages a unique environment in which women, after childbirth, can choose between work, lower benefits with job protection, and higher benefits without job protection. When cash benefits become more generous, many mothers choose to forgo job protection and substitute out of the standard parental leave program. While this brings them greater financial security in the short run, it drives long-lasting declines in employment and earnings, most of which occur after the benefits are exhausted. Using a revealed preference approach, I find that mothers attribute a significant value to short-term transfers after childbirth

This paper examines the effects of real estate transfer taxes (RETT) on property prices using a micro dataset of roughly 17 million German properties for the period from 2005 to 2019. Our empirical analysis exploits variation in RETT rate hikes across German states and over time. Our monthly event study estimates indicate a price response that strongly exceeds the change in the tax burden for single transactions. Twelve months after a reform, a one percentage point increase in the tax rate reduces property prices by on average 3%. Negative price effects are predominantly found in counties where properties sell quickly and price discounts are small and in growing housing market regions. Moreover, effects are stronger for apartments and apartment buildings than for single-family houses. Our results can be rationalized by a theoretical model that predicts larger price responses in sellers' markets and for properties with a high transaction frequency.

Several types of taxation include the market value of housing in the tax base. Thus, it becomes important to obtain accurate, timely house values. However, to value residential property represents a major challenge for tax administrations due to informational constraints. In the present paper we present and discuss a simple procedure for assigning market value to each dwelling in Norway, based on deriving estimates from hedonic regressions. The valuations are updated yearly to reflect changes in market value. To our knowledge, this is a novel example of using predictions obtained from regression estimates to define full-scale housing values for tax purpose. We present and discuss two versions of our procedure -- the first prediction model that was implemented in 2010 and a simple, but significant, upgrade of the model that could be implemented with no additional gathering of data.

This paper presents novel estimates on the incidence of corporate taxes by measuring the effect of local business tax increases on the welfare of commercial landowners. We use unique data on commercial real estate prices in Germany covering 1 million properties offered for sale and 2.4 million properties offered for rent between 2008 and 2018. Empirically, we exploit the German institutional setting with over 4,000 municipal tax changes using an event study design. The estimates suggest that a 1 percentage point business tax increase reduces commercial real estate prices (rents) by 3 percent (2 percent) after 5 years on average. This result is robust to the inclusion of a large set of controls and to heterogeneous treatment effect estimators. We find that commercial landowners bear between 15-24% of the tax burden, while workers (7-20%) and residential landowners (4-25%) bear less burden than prior research suggests with firm owners around 44-57%.

Liability-side equivalence suggests that economic incidence is independent of statutory incidence. We empirically test this conjecture by studying a policy intervention in the German market for real estate agents, which partially shifted the statutory incidence of agent fees from buyers to sellers. Specifically, we study listings posted on online real estate marketplaces two months before and after the implementation date. We employ a difference-in-differences estimation that exploits region- and listing-type-specific susceptibility to the intervention. Our results suggest that liability-side equivalence generally holds, but with two qualifications. First, sellers did not adjust listing prices, but effected higher transaction prices in bilateral negotiations. Second, sellers were only able to do so when they had bargaining power over buyers. We further find that demand for brokerage decreased following the intervention. Our findings have important implications for the distribution of statutory incidence of intermediary fees in matching markets and tax liability considerations.

Stock market participation among working household heads jumped upwards in the year 2020, in Germany by about 25%. A major cause is the required use of work from home (WfH). We show this by repeating a benchmark study with demanding data requests and adding WfH to the explanatory variables. Moreover, we implement an instrumental variables estimation based on WfH capacity. The transmission channels seem to work via increased available time and time flexibility. Moreover, we show that WfH makes the stock market accessible to a broader population, including lower income groups, which may contribute to lower income inequality.

In most countries, retirement wealth is relatively illiquid due to early withdrawal penalties. While policymakers face a trade-off between flexibility and commitment, there is no consensus on the optimal solution to this problem. Exploiting administrative tax data and a natural experiment from Denmark, we document how individuals react to an exogenous reduction in the early withdrawal penalty. Moreover, we show how individuals use early withdrawal from pension accounts to smooth out the financial consequences of negative life events like unemployment. While the empirical results confirm the benefits of flexibility in case of a negative life event, they also suggest that households may be tempted to spend instead of saving for retirement if the penalty is too low. We use a life-cycle model to give a structural interpretation to the data and evaluate alternative policies to optimally balance the trade-off between flexibility and commitment.

Low- or middle-income countries, where participation in pension schemes is rare, are experiencing fast population aging and weakening traditional risk-sharing networks, but little is known about how their citizens prepare financially for old age. Using age-cohort-time decompositions on 18 years of micro-data from Pakistan, we find that the average household accumulates 4.2 years’ worth of consumption between the head’s ages of 25 and 65, mostly in the form of illiquid residential housing. Land is also an important part of rural households’ portfolio but grows little over the life cycle (10 months’ worth). More liquid forms of wealth such as financial wealth also grow with age, but in much more modest amounts. This ability to long-term save could motivate the extension of contributory pension instruments to the informal sector. More recent cohorts accumulate significantly more which is consistent with anticipations of higher longevity and lower family transfers in old age.

Financial literacy research shows that women and older people have significantly lower levels of financial literacy, which affects investment and savings decisions. Confidence can be a driving force in responding to financial literacy questions and in financial decision-making. We conduct a survey experiment to test whether information about group differences in numeracy skills affects confidence, hypothetical investment and savings decisions, and demand for information and education. We find that providing information about group differences has some positive effects on male respondents' confidence, but doesn't affect female respondents. Furthermore, providing information about group differences doesn't affect investment and savings decisions or the demand for political information.

This paper examines the dynamic effects of the COVID-19 pandemic on healthcare utilization and its underlying mechanisms, using high-frequency medical claims data (2019-2021) that covers the entire Korean population. Employing an individual fixed-effects model, our findings show substantial reductions in outpatient visits during the COVID-19 period, particularly among patients with mild illnesses. Moreover, we observe significant variations in the effects on healthcare utilization based on individual characteristics and the type of illness. Notably, the decline in the outpatient visits was more pronounced among children under 20, the high-income group, and the unemployed group. However, the decreased outpatient visits among children did not appear to correlate with an increase in ACSC hospitalizations. This may provide suggestive evidence of a reduction in the unnecessary use of medical care following the COVID-19 pandemic.

We examine longevity and its transmission across generations using a unique dataset containing about more than 26 million individuals born between 1880 and 1920. We first document that absolute mobility was high during this period: between 45 and 55 percent of individuals lived longer than their parents, though it was much higher for women than men. Relative measures, on the other hand, show substantially less variation across time and subpopulations. The intergenerational correlation in longevity (a measure of persistence rather than mobility) is 0.09 for both sexes – this low correlation is observed across races, education groups, cohorts and birth states. Finally, we document that the intergenerational persistence of longevity is much smaller than the persistence in socio-economic status. Moreover, correlations in longevity and in education are largely independent of each other, suggesting that mobility in wellbeing was larger than measures of income suggest.

Using Ramadan fasting as a natural experiment, we estimate the long-run impacts of in-utero health and nutrition shocks on adult outcomes. We exploit administrative tax return data comprising the universe of income tax returns filed in Pakistan during 2007–2009. The data allow us to link in-utero Ramadan exposure of individuals with their later life labor market outcomes. We find a robust negative effect of Ramadan exposure on earnings (a lower-bound estimate of around 2–3 percent). The exposed individuals are less likely to be in high-skilled occupations and less likely to be in the top of the income distribution. Using nationally representative survey data we show that our results are unlikely to be driven by

selective timing of conception. We run a household survey to provide the first stage of our results and go beyond the intention-to-treat effects to estimate a local average treatment effect.

This paper studies the impact of austerity measures introduced by the UK government after 2010 on life expectancy and mortality. We combine administrative data sources to create a panel dataset spanning from 2002 to 2019. Using a difference-in-differences strategy, we estimate the effect of cuts to welfare benefits and changes in health expenditure on life expectancy and mortality rates. We find that austerity reduced life expectancy by 2.5 to 5 months by 2019, with women being twice as affected as men. The primary driver of this trend is cuts to welfare benefits, although changes in healthcare spending have a larger effect per pound spent. The results suggest that austerity caused 190,000 excess deaths, or 3 percent of all deaths, between 2010 and 2019. Taking into account the years of life lost, we conclude that the costs of austerity exceeded the benefits derived from reduced public expenditure.

Digital economy firms are often accused of avoiding profit taxes on a large scale, prompting numerous countries to impose digital service taxes on these firms to indirectly tax their profits. We study the incidence of digital service taxes using data on Amazon’s fee structure and pricing. We find that Amazon increased its fees by almost the exact amount of the digital service tax. Firms using Amazon as a platform have largely been able to pass these increased costs onto consumers. On average, the incidence of digital service taxes falls almost entirely on consumers, though there is significant heterogeneity among countries.

This paper presents simulations of the tax revenue arising from the Pillar One Amount A proposal of the G20/OECD. Amount A aims at revising taxing rights on multinational enterprises with at least EUR 20 billion in revenue and with profitability above 10%. In a first step, we identify the MNEs that would be covered by Amount A. Then, we approximate the destination-based revenues of MNEs in different jurisdictions, to determine reallocated profits. In a final step, we account for double taxation relief to obtain the net revenue from Amount A. We find that the total amount of additional tax revenue arising from Amount A is around EUR15.6 billion. The extent of taxing rights redistribution induced by Amount A is affected by (a) the inclusion criteria of covered MNEs; (b) the reallocation parameter of 25 percent.

In 2021, the OECD announced that over 130 jurisdictions supported its “Pillar 2” proposal for a 15 percent global minimum effective tax rate for large multinational enterprises. This proposal has since been adopted unanimously by the European Union, and has come into force on 1 January 2024. We employ an event study methodology using daily 2021 stock market returns of 3.275 European firms to determine how Pillar 2 announcements affected the value of firms subject to the global minimum tax, and that of their competitors. While we find no significant impact on the stock market returns of directly affected firms, we do find a positive effect on the returns of their competitors. Our results suggest that the introduction of a global minimum tax for large multinational enterprises can be beneficial for their competitors, shedding light on the role of a minimum tax on inter-firm competition and the level playing field.

This paper examines the most direct method to curb European profit shifting: an EU-wide adoption of unitary taxation. Using country-by-country reporting data, we estimate country-level revenue changes when taxable profits are distributed based on different formulas measuring economic activity. We find that tax revenues would increase for most EU members. While some countries – in particular the Netherlands, Luxembourg, Ireland, and Malta – may incur losses, these can be offset by adopting an effective national top-up tax, consistent with the EU's plan to introduce a minimum corporate tax of 15%. Our findings indicate that unitary taxation would not only restore fair competition and significantly boost EU-wide tax revenues—ranging from US$ 24.1 to US$ 26.8 billion in isolation or US$ 34.5 to US$ 35.4 billion when combined with the minimum tax—but is also politically feasible: When coupled with the minimum corporate tax, no member state would lose from its implementation.

This paper questions how individuals and couples should be taxed when women face wage discrimination in the labor market.

When women anticipate being discriminated against in the labor market, it affects their decision to invest in education. Consequently, women, thinking that their return on education will be lower, choose to be less qualified on average. This confirms employers' bias regarding the qualifications of women. I find that when women face wage discrimination, they have more incentive to work on household production compared to their husbands and less in the labor market. I show that the optimal income tax rate depends on a pigouvian term that decreases the marginal tax rate of the discriminated group. This paper aims to provide guidance for tax reform when gender inequalities in home production and the labor market interact.

We document trends in inequality in earnings and disposable household income for men and women in Germany from 2001 to 2019. We find that males at the lower half of the earnings distribution have lower earnings in 2019 than in 2001. In contrast, female earnings have increased throughout the distribution. Households and the welfare state has cushioned much—but not all—of the income drop at the bottom of the distribution. A reweighting analysis reveals that changes in working hours as well as in the composition of nationalities explain a substantial part of the drop in the 10th earnings and net income percentile for men. Moreover, changes in household structure have led to an increase in disposable incomes throughout the distribution.

Unequal consumption sharing within households is well-documented. However, there is limited evidence on the stability of within-household inequality over time. Moreover, the responsiveness of within-household inequality to the evolution of social norms and public policy remains an open question to a significant extent. We combine a collective household model with consumption survey data spanning 23 years to study the evolution of within-household consumption inequality. Our findings reveal gender inequality within households. We also observe a slight decrease in women's relative resource shares over the considered time period.

We examine the benefits and challenges associated with recent advancements in automatic tax information exchange agreements to improve tax compliance at the top of the wealth distribution. Since 2016, Colombia has received information on foreign accounts held by its citizens in the United States and 103 other countries through the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS). We merge FATCA and CRS reports with personal tax return microdata on domestic and foreign income and wealth from 2016 to 2021. First, we outline recent trends in the likelihood of Colombians voluntarily disclosing foreign assets to their authorities and the declared amounts. Second, we juxtapose self-reported wealth against data obtained from CRS and FATCA. Third, we investigate the role of CRS and FATCA in facilitating the enforcement of wealth and income taxes.

This paper uses account data leaked from an Isle of Man bank to study the effectiveness of automatic exchange of bank information agreements (AEOI). We establish three sets of results. First, we find that AEOI treaties do not legally cover a large share of assets held offshore. Second, we observe that banks in charge of reporting appear to correctly identify most reportable accounts and to communicate this information truthfully to tax authorities. The quality of reporting is better for individual accounts than for company accounts, either because of complexity or because of non-compliance by the bank. Third, we find evidence that clients of the bank who were more at risk of being reported on preemptively closed their accounts, potentially circumventing the AEOI reporting process. This paper sheds light on the design flaws of AEOI agreements, and provides new evidence on how sophisticated individuals ultimately avoided this new transparency shock.

Countries worldwide committed to automatically exchanging financial account information under the CRS, including many less developed countries (LDCs). It is still unclear if the scheme improved tax compliance, however, in particular in the weaker enforcement context of LDCs. In this project, we merge CRS reports received by the South African Revenue Service to income tax returns to shed light on this question. We show that foreign wealth by South African residents is concentrated at the top of the income distribution. The findings further indicate that CRS reporting lowers tax evasion - but a significant compliance gap prevails. This is consistent with incomplete enforcement: Misreporting of taxpayer identifiers often prevent successful matches of CRS reports to tax returns; and conditional on matching, discrepencies between taxpayers' self-reported and CRS-reported foreign income do not impact observed audit risk or audit adjustments - suggesting that CRS reports do not yet effectively inform audit processes.

This paper studies the effects of the 2017 multilateral automatic exchange of information (AEOI). Leveraging rich tax data and difference-in-differences designs, I document significant positive tax compliance behavior. The AEOI caused 107k taxpayers (2% of all) to participate in the Swiss amnesty. Together, they disclosed CHF 35.2 billion Swiss francs—more than 5% of GDP. This static macro effect persists at the micro level: Once an evader enters the amnesty, their wealth increases by around 55% on average and remains at this higher level. Lastly, I show that tax evasion is widespread in Switzerland and more evenly distributed than elsewhere.

This paper uses an alternative approach to measure the revenue costs of tax treaties between developed and developing countries. Using a dyadic panel dataset of asymmetric DTTs between OECD members and developing economies, the paper investigates the effect of double tax relief method at the residence country of the investor, and the inclusion of tax sparing provisions, on the difference between WHTs on passive income under developing countries’ domestic tax law and WHT rates negotiated in tax treaties with OECD members. Results of the empirical analysis suggest first, that the difference between domestic and negotiated WHTs on portfolio dividends is higher when the OECD member uses the credit method, as compared to when it uses the exemption method. Second, results suggest that the inclusion of the tax sparing provisions vanishes the positive effect of the credit method on the difference between domestic and negotiated WHTs on portfolio dividends.

This paper provides the first evidence of the effect of CbCR in developing countries, mainly focusing on the market response of the African stock market to the country-by-country reporting regulation. Using the event study methodology, the results indicate a negative significant market response for firms subject to CbCR requirements. Tax-aggressive firms show a pronounced significant negative response around the event date, suggesting that investors anticipate increased tax liabilities due to heightened scrutiny of their tax planning practices, ultimately reducing future profits. Cross-listed firms exhibit a stronger significant market response in foreign markets than in domestic markets, highlighting differing investor reactions. This underscores the variation in how foreign and domestic investors process similar information across different markets. Additionally, firms with compliance issues show a significant market response. This paper provides an understanding of how regulatory transparency influences firms with different characteristics in developing markets.

Capital mobility has long preoccupied international tax scholars. According to prevailing narratives, mobile capital force countries to race to the bottom in competing to attract investment, and enables multinationals to shift profits. This paper argues, however, that mobile capital’s significance for international taxation may be largely an illusion.

First, the rising importance of intangibles makes capital less, not more, mobile. Intangibles seem mobile only because the rights to tax returns to them are arbitrarily assigned, but that is a fact about tax law itself, not an independent fact that tax policy responds to. Second, empirical evidence for tax competition is weak, and this is just what theories about multinationals would predict. Third, modelling profit shifting as capital mobility generates conceptual confusion and is often factually inaccurate. Fourth, the international provisions of the corporate income tax generate externalities that likely dominate those from the setting of rates and domestic tax base.

This paper determines the impact of DTAs on foreign direct investment (FDI) in Nepal from 1990 to 2020. A correlational fixed-effects estimation shows a high correlation between DTAs and FDI, with investment flows from countries signing a DTA varying from NRs.796 million to NRs. 2,002 million per year (USD 6 -18 million). The paper further estimates the average treatment effect of treatment using synthetic difference-in-difference (SDID), which suggests a positive but statistically insignificant difference between FDI from DTA countries (control) and countries without a DTA (treatment). The qualitative assessment shows that policymakers are willing to support DTAs to attract foreign investment. Yet, there seems to be limited capacity to negotiate a new treaty or review an old one. Further, the paper presents an assessment of revenue loss from a single industry (airlines), revealing that the country foregoes an estimated NRs635 million (USD 5 million) annually because of DTAs.

Recent evidence suggests that social mobility has declined in many developed countries despite some of them pursuing proactive redistribution policies. In this paper we characterize the optimal mix of income tax and education policies that a government should adopt to maximize a long-term social objective that includes considerations for income redistribution and upward mobility. We show that switching from an elitist to a meritocratic education system, or from a short-term to a long-term vision of social welfare, fosters upward mobility but it can sometimes lead to increased inequality.

We investigate the relationship between inequality and public education funding in a model of probabilistic voting where the private option is available and voting participation di¤ers across income groups. A change in inequality can have opposite

effects at di¤erent income levels: higher inequality decreases public spending per student and increases enrollment in public schools in poor economies, while the opposite holds in the rich ones. A change in the tax base can also have non- monotonic effects. These novel theoretical predictions, with support in U.S. school district-level data, reconcile previous contradictory results in the political economy literature on redistribution and inequality.

In this paper, we introduce novel estimates of wealth inequality, integrating the standard household wealth concept with newly assessed individual human capital. Using microdata and national accounts from numerous countries since 1979, we explore the distribution across age, gender, education, and occupation. Our analysis reveals two key findings: human capital is more evenly distributed than financial capital, and total wealth, the sum of human and financial capital, is significantly more equal than financial wealth alone. This study offers a groundbreaking perspective on global wealth dynamics, emphasizing the critical, yet often overlooked, role of human capital in wealth distribution.

Existing literature shows that re-distribution does not play an important role for determining optimal income tax rates when skilled agents invest in education. This paper departs from the literature by adding government policy on subsidies and regulation of higher education. I conclude that in the short run optimal income tax rates are crucially influenced by the re-distribution issue. Moreover, the conclusion about optimal declining or rising marginal tax rates at the top is mostly determined by educational income inequality. For empirically plausible simulations under an inequality averse social planner, a more unequal educational economy justifies rising marginal tax rates at the top.

In a continuous-time setting, we study the taxation of a state-sponsored monopolist, granted with the right to use a government-owned facility, when there is asymmetric information of demand parameters hit by imperfectly correlated shocks. We show that optimal taxation requires an appropriate combination of fixed and time-adjusted payments from actual sales. We then analyse how the optimal combination of fixed and variable transfers is impacted by the private revenue potential, by the expected variability of demand and by the importance assigned to tax receipts relative to other welfare concerns.

Do elections constrain incumbent politicians’ policy choices? To answer this longstanding question, this paper proposes a novel identification strategy to separate electoral incentives from selection effects. Taking advantage of the unique setup of lame-duck sessions in the U.S. Congress, where lame-duck incumbents who lost re-election vote on the same issues as their re-elected colleagues, I use a close election regression discontinuity design to exploit quasi-random assignment of re-election seeking representatives to lame-duck status. Comparing within-incumbent changes in roll call voting of barely unseated lame ducks to narrowly re-elected co-partisans serving the same congressional term, I find that lame ducks revert to more extreme positions with lame-duck Democrats (Republicans) voting more liberally (conservatively). Consistent with lame ducks’ loss of re-election incentives driving the result, the effect of lame-duck status on roll call extremism is more pronounced among ex-ante more vulnerable legislators.

We examine the influence of lobbying through meetings, a novel measure of such activity, between members of the European Parliament (MEPs) and interest groups during legislative procedures in Europe. Using the Transparency Register, we use data reported by MEPs on meetings and amendments written during the legislative procedure for a set of regulations to investigate whether a meeting at t-1 influences the writing of the law by the legislator. Using a pre-trained Large Language Model (LLM) as a novel method to quantify change in amendments, preliminary results suggest the writing of a share of amendments in the Digital Services Act (DSA) tends to benefit gatekeepers - defined as a firm with monopolistic behavior - and undermines consumers and other online platforms when written by rapporteurs, although it is not clear if this legal preference is caused by meetings with representatives of gatekeepers.

By employing a unique prison-specific administrative dataset encompassing the universe of 187 Italian public prisons, we analyze the determinants of the prison riot wave of March 2020 at the start of the COVID-19 pandemic. Probit estimates reveal that prison size and the extent of overcrowding positively correlate with the likelihood of riots. In contrast, a criminality index shows a negative impact on riots. Proxies for the effectiveness of prison management, composition of prison population, and level of internal violence exhibit no significant association with riots. Data support emulation effects: the likelihood of riots occurring in a given prison positively correlates with riots in nearby geographical areas. This study highlights the role of prison conditions, notably overcrowding, in the 2020 prison riot surge. We find no evidence supporting the Italian parliamentary Anti-Mafia Commission of Inquiry’s hypothesis that COVID-19-related prison riots were the result of a conspiracy orchestrated by Italian organized crime.

We study the impact of the COVID-19 pandemic on formal sector employment in Uganda. Utilizing employee-level administrative tax data from the Uganda Revenue Authority, we describe the dynamics of employment as the pandemic evolved, seeking to better understand the various coping strategies undertaken by firms in the face of reduced sales and business activity. We find that over 10% of formally employed workers fully lost their incomes in the immediate aftermath of the onset of the pandemic. Of those remaining employed, ~14% saw their salaries fall in the short term and by March 2021 over 9% were still earning less than pre-pandemic. We match these pay-as-you-earn records with firms’ income tax returns to better understand how firm characteristics affected the likelihood that different coping strategies were undertaken. Larger and more profitable firms pre-pandemic were more likely to retain their workforce and less likely to cut employee salaries.

This paper examines the labour market impacts of Finland’s initial COVID-19 subsidy program, designed to mitigate the economic fallout of the pandemic. Utilising a novel and comprehensive dataset and a judge-leniency instrumental variables design, we analyse the effects of these subsidies at both the firm and worker levels. Our findings reveal nuanced effects: the program increased the wage sum in the treated firms and decreased the risk of unemployment. On the other hand, the subsidies reduced labour productivity in treated firms, potentially hindering creative destruction. At the worker level, subsidised employees fared better in subsequent years than workers in non-subsidised firms, with slight increases in annual salaries and a higher likelihood of being employed. However, these workers were more likely to be employed in lower-productivity firms. This paper contributes to our understanding of the implications of fiscal interventions during crises and provides critical insights for shaping future economic policies.

We estimate the effects of a large targeted income support for the self employed during the COVID-19 pandemic in the Netherlands. We leverage administrative data on all self-employed with survey data on hours worked and tax records on revenue. Using dynamic differences-in-differences models and quarterly data for the period 2018-2021, we exploit differences in eligibility based on whether or not the self-employed had a partner before the pandemic. We find an intention-to-treat effect of -12% for hours worked and -7% for revenue, compared to pre-pandemic levels. Hence, our results suggest that the targeted program can have adverse effects on the work effort of the self-employed.

The paper discusses the economic impacts of the COVID-19 pandemic in the EU, focusing on monetary compensation schemes aimed at preserving household income in 2021 and comparing them with 2020. It examines how these schemes absorbed income shock for employees and the self-employed. Utilizing microsimulation techniques and EUROMOD, it simulates labor market conditions and assesses the role of compensation schemes in stabilizing incomes, reducing inequality, and alleviating poverty across EU Member States. Compared to 2020, we find a decrease in the cushioning effect of monetary compensation schemes and an increased role of unemployment benefits. The overall stabilizing effect at the EU level was progressive, cushioning the shock for lower-income households more than for richer households. Without schemes, income inequality and poverty would have been higher, but their effect was relatively small overall due to limited usage in 2021 compared to 2020.

We examine the role of spatial policies on employment, location choices, and labour force participation in markets marked by labour market frictions and spatial externalities. We compare the outcomes of competitive markets with those of a welfare-maximising social planner. Our findings indicate that including local labour force participation as a key component in our model significantly alters optimal spatial policies. This adjustment affects the spatial distribution of workers, labour supply, and overall welfare. Using data from Germany, we show that these optimal policies could increase the labour force, especially among women, by about 2% and improve aggregate welfare by 5%. Ignoring the extensive labour supply margin leads to a substantial underestimation of the effects of fiscal redistribution and the benefits derived from spatial policies.

Research in health economics indicates that spending time in traffic has long run adverse consequences for health. Literature suggests that, when making decisions about commuting, workers underestimate the consequences for their long run health. For this reason, we argue that commuting has demerit properties. From a welfare perspective, on top of the demerit aspect, commuting is also associated with an externality. We derive marginal cost of funds (MCF) expressions incorporating externalities and demerit aspects. We calculate the MCF for the 51 US states, for a tax on commuting, income taxation, and a poll transfer. We show that both the externality and the demerit considerations cause rank switches in over half of the States and that an increase in the taxes on commuting accompanied by a decrease in other taxes benefits social welfare.

This paper uses a novel GPS-coded dataset for more than three million car trips in the four largest German cities to measure the efficiency losses from using uniform fuel taxes as a second-best optimal tax to reduce traffic congestion. We estimate the short-run price elasticity of vehicle-kilometres travelled (VKT) across different hours of the day from a panel gravity equation. Identification of the price elasticity relies on comparing VKT changes between granular trip origin and destination pairs within each city. We find that the VKT price elasticity differs strongly across trips taken at different hours of the day, and that this elasticity correlates with contributions to the congestion externality. Using a policy simulation, we show that 52% of the deadweight loss of the congestion externality remains after levying a uniform fuel tax.

The paper discusses the tax treatment of commuting where wages and housing cost vary across locations. An income tax distorts the locational choices of agents, who dislike commuting and have preferences for place of residence. Further distortion issues arise where housing is tax favoured, as is often the case. Wages, housing cost and commuting cost determine how subsidising or taxing commuting affects behaviour and social efficiency. A subsidy encourages commuting and induces agents to choose a more favourable living place. The analysis clarifies the circumstances in which the subsidy alleviates or exacerbates the tax distortions. The distributional impact depends on the effects of wages on commuting. An empirical illustration based on Norwegian data supplements the theoretical analysis and shows how one can infer efficiency effects of responses to subsidies on commuting.

We use administrative tax data from 10 different developed and developing countries to calculate the within-country corporate elasticity of taxable income and investigate differences between these estimates. Our estimates exploit the differential tax treatment of business income for firms earning positive and negative taxable income in a bunching framework. We develop two new estimators to overcome several challenges that are unique to the business context. We find meaningful differences in the elasticity, with Greece having the largest (1.2) and Guatemala having the smallest (0.09). The differences we find, however, are much smaller than the range found in the literature (0 to 5). This suggests that some of the difference in the estimates in the literature may be due to differences in method rather than fundamental firm-specific characteristics, e.g., industry or tax system-specific characteristics, e.g., level of credits and enforcement.

This paper estimates the elasticity of taxable income to the corporate income tax (CIT) using a 20-years panel of tax administrative data on French companies. I leverage the implementation of a kink at 38.120AC in the CIT in 2001, under which the tax rate is reduced from 33.3% to 15%. I find large and dynamic bunching at the kink, up to 17% of the normal number of firms in 2012. This allows me to compute the elasticity of taxable income to the CIT rate, which ranges from -0.05 the first year of the reform to -0.23 ten years after. From 2013 onward, the bunching mass decreases which coincides with the introduction of a new payroll tax credit. Firms in the bunching mass come from below the kink and for some of them, far from it: more than 6.5 times below the kink, suggesting that they have very heterogeneous elasticities.

We assess firms' taxable income response to a dividend tax credit increase when corporate and personal taxes are integrated. First, we theoretically show that, in an integrated tax system, welfare changes stemming from a rise in corporate taxes depend on two parameters: the elasticity of taxable income with respect to the corporate tax rate and with respect to the dividend tax credit. Second, to estimate both parameters, we propose an identification strategy that relies on the bunching methodology and the excess bunching difference before and after a tax reform that increased the dividend tax credit. Using Canadian administrative tax data and the presence of a kink in the corporate tax system, we estimate these elasticities and empirically show that the increase in the dividend tax credit reduced the deadweight loss associated with an increase in the corporate tax by more than 50%.

We explore factors that contributed to a recent increase in macro-based profit shifting analyses, summarize the methods, and provide a meta-analysis of recent revenue loss estimates. We find a consensus estimate for tax revenue losses in the US of around 0.3 percent of GDP in 2022, which amounts to around 18 percent of total CIT collections. The meta-analysis reveals that double counting of income increases estimated revenue losses as does the use of statutory tax rates. The identification approach does not help explain variation in estimates. An important advantage of macro-data is its wider country coverage, enabling estimation of global revenue losses. A simple average of existing studies suggests that these amount to around 0.34 % of GDP or 12 percent of global CIT collections. The revenue potential from more effective measures to combat tax evasion, in the order of USD 200 billion annually, is significant and potentially larger than expected.

This paper delivers the first comprehensive analysis of how firms respond to carbon taxation in emerging economies. Our evidence builds on exhaustive administrative data from South Africa, the 13th largest emitter worldwide. The presented results are twofold. First, we establish stylized facts on the types of firms that are affected, how much revenue is generated from which sector and which share of national emissions the tax is able to capture. Second, we study the dynamic impact of the carbon tax on firm-level outcomes such as sales, profits, capital and labor inputs. We show that the design of the South African Carbon Tax leads to substantial heterogeneity across sectors in terms of how strongly firms are affected. Contrary to the concern that carbon taxes may impede economic growth we measure no negative effects on firm performance on average.

A central concern in climate policy making is that increasing carbon costs unilaterally would impair economic activity and competitiveness. Using comprehensive microdata, this paper provides first international firm-level evidence on the joint performance effects of carbon policies. Shadow prices of fossil energy sources are employed as an integral and internationally comparable measure of carbon costs. We evaluate the impact of carbon costs on various dimensions of economic activity for up to 3.1 million firms from 32 countries and 15 competitiveness-prone industrial sectors in the period 2000-2019. Carbon costs hardly hurt most industrial firms and predominantly elicited adaptation rather than relocation responses. Economically modest employment reductions were concentrated in capital-intensive firms and small firms in emissions-intensive, trade-exposed sectors, particularly in the EU. In these sectors, large and capital-intensive firms ramped up domestic investments in response to carbon cost increases, and small firms improved productivity. Profitability and exit probabilities were hardly affected.

We identify and examine a novel welfare channel of fuel economy standards through the interaction with public transit and households' location choices. A stricter emission standard for cars decreases the marginal cost of driving and triggers a shift in modal choice from public to private transport and a rise in carbon emissions. In the long run, the modal shift exacerbates the increase in the average commute length that results from lower driving costs, as well as traffic congestion. The annual welfare cost for a 50 percent emission reduction turns out 3.7 percent (24 USD p.c.) higher than when neglecting public transport. With a larger role of public transport as in Europe, this effect rises to 11.4 percent (72 USD p.c.). An alternative fuel tax policy, by contrast, induces a modal shift towards public transport and reduces the average commute, urban congestion and the welfare cost of emission reductions.

This paper studies the effects of a significant fuel tax increase on driving and CO2 emissions. Despite the prevalence of fuel taxes, causal evidence of the effect of fuel taxes on driving and emissions is limited, and the reasons why existing estimates vary remain unexplored. Our research directly addresses these gaps in the literature by exploiting exogenous variation provided by Finland’s 2012 energy tax reform. The reform increased the tax on diesel by almost 12 euro cents per litre, while the tax on gasoline was increased by less than 3 euro cents per litre. The reform allows us to utilize a quasi-experimental setting and compare the kilometers travelled by diesel and gasoline-powered cars to identify the impacts of fuel taxes. We employ a large data set of over 2.2 million cars and their odometer readings. Our credibly causal estimates indicate a clear reduction in the kilometers driven by diesel cars.

The Global Minimum Tax (GMT) introduces significant changes to the taxation of large multinational enterprises. This paper assesses the impact of the GMT using new and unique data on MNE activity and has four main findings. First, the GMT reduces the incentives to shift profits, resulting in an estimated fall in global shifted profits by around half. Second, the GMT will reduce low-taxed profit worldwide through reduced profit shifting and top-up taxation. The global amount of MNE profit taxed below the 15% minimum effective rate is estimated to fall by more than two thirds. Third, the GMT is estimated to increase CIT revenues by USD 155-192 billion per year. The distribution of these gains across jurisdictions strongly depends on implementation choices of governments. Finally, the GMT is estimated to reduce tax rate differentials across jurisdictions which could potentially impact the efficiency of the allocation of investment and economic activity.

We study which multinationals are likely to reduce their profit shifting in response to the global minimum top-up taxes introduced in 2024, using 34 thousand multinational-country observations from tax returns, financial statements and country-by-country reports of all multinationals active in Slovakia in 2020. We estimate that its corporate tax revenues will increase by 3% or EUR 73 million, with 57% of the increase due to its top-up taxes on undertaxed profits in Slovakia (52% of the increase) and in other countries (5%). The other 43% of the increase is corporate income tax on profits that are no longer shifted out of Slovakia due to other countries, both non-headquarter (87%) and headquarter (13%), applying top-up taxes. Multinationals will reduce profit shifting by 57%; by 59% to low-tax countries but only 42% to high-tax ones. In particular, German and Austrian multinationals will mostly continue shifting profits to their parent countries.

Announcements made in 2021 by the Organization for Economic Cooperation and Development about a global minimum tax (Pillar Two) not only were legally non-binding but also lacked domestic political support in many countries. It is thus unclear how many nations will adopt Pillar Two. The initial OECD process also avoided important questions of international law: legal controversies may importantly determine the course of Pillar Two implementation. This paper analyzes strategic incentives for adopting Pillar Two on the part of national-income-maximizing governments. Countries from which multinationals originate will likely suffer deep losses and be better off defecting. Pillar Two’s enforcement mechanism, the UTPR, lack effectiveness; accounts of its purported clever design lack logical inconsistency. Any purported novelty in Pillar Two design must confront first-order questions about international law. Assuming Pillar Two as new institutional reality in international taxation is thus over-hasty and may lead to bad social science.

We analyze the role of the threshold in the Global Minimum Tax (GMT) on the tax competition between a country with an multinational firm affiliate that sells in the local market and a tax haven country that is setting the tax rate to induce profit shifting from the sales affiliate to a tax haven affiliate. We assume that firms are heterogeneous in their productivities and faced fixed costs of setting up a tax haven affiliate, so that only the most productive firms will choose to have a tax haven affiliate. We examine how the existence of an intensive and extensive margins of profit shifting affect the tax competition between the tax haven and non-haven countries.

Drawing on administrative tax return and trade data linked with employment records, this paper looks into how multinational enterprises (MNEs) in Norway responded to an increase in transfer pricing (TP) strictness. We analyze the amount of money MNEs spent on tax compliance - both on external consultants and in-house lawyers and accountants - after the reform. Difference-in-differences event study designs show that the regulation significantly impacted tax payments, reported profits, and spending on tax advisors. On average, MNEs spent an extra NOK 4.64 million on tax compliance services in the subsequent year. This includes a 12.5% increase in spending on consultants and a 150% increase in spending on in-house advisors. We also found evidence that stricter TP regulations in countries where affiliates locate raised the demand for tax advisors for firms in Norway.

This paper studies how firms manipulate their transfer prices to shift profit from high tax countries to low tax countries. Using detailed transaction-destination level firm data for years 2013-2019, I find evidence of Finnish multinational enterprises underpricing their exports to low tax destinations. By exploiting variation in corporate income tax rate differences and differences in the ownership of affiliates, I apply a triple difference estimation strategy. I find that a 1 percentage point increase in tax rate difference decreases export unit value by 1.2% among multinational firms exporting to low tax countries. My results suggest firms use transfer pricing as a complement channel, as firms more prone to other profit shifting mechanisms also underprice their exports more. Also, I provide evidence that transfer mispricing is concentrated in exports destined to countries where the multinational’s affiliate has a higher level of economic activity.

The development of digital technologies allows multinational enterprises (MNEs) to operate online platforms and supply network products for their platform. Although improving their platform by investing in online technologies benefits consumers and service providers in platforms, it also helps platform MNEs manipulate transfer prices and save taxes because new technology makes applying the arm’s length principle difficult. This study investigates the effects of tightening transfer pricing regulations in two-sided markets. We show that stricter transfer pricing regulations reduce an MNE’s tax avoidance gain from investing in online technologies and an investment level. Besides that, one of the main findings is that a tighter transfer pricing regulation harms a high-tax country when transfer pricing regulations are loosely enforced, and the marginal impacts of online technology investments on network externality are larger than that on profit shifting. This finding provides an important policy implication for international taxation under the digital economy.

In this paper, we investigate the labor supply effects of living in affordable housing. We develop a new and unique administrative data set of individual labor market biographies linked to subsidized housing projects in five German cities, allowing us to follow individuals over almost 20 years after having moved into the affordable housing unit. Using an event study design, we find that access to affordable housing increases total labor income and decreases the likelihood to be unemployed. We explain these results by four complimentary mechanisms: First, the affordable housing policy reduces negative labor supply incentives of housing benefits. Second, the affordable housing units are considerably closer to the city center and better connected to the urban labor market. Third, the rent subsidy allows workers to invest in their labor-related skills. Fourth, the residential stability provided by affordable housing in Germany likely induces workers and firms to invest in specific human capital.

This paper presents novels evidence regarding the persistent impact of working from home (WFH) on urban real estate. Leveraging data encompassing nearly all property offerings between 2014 and 2023 and WFH potential at the postcode level in 50 German metropolitan regions, we observe a gradual and sustained decrease in price premiums for proximity to urban centers since the onset of the pandemic. Our identification strategy exploits the spatially differential exposure to the WFH shock induced by Covid-19, finding that WFH significantly contributes to the observed decline in premiums. The impact is more pronounced in larger metropolitan areas. Our analysis shows that demand-side mechanisms drive the WFH effect, encompassing out-migration to remote areas, increased employment growth in the periphery, and higher valuations of larger properties. Our findings underscore the substantial implications of WFH for future urban planning and housing policies, particularly in city centers.

Place-based policies that allocate resources to specific areas inadvertently also designate these areas as needing assistance, potentially leading to the development of neighbourhood stigma. The common coupling of resource allocation and area designation makes it difficult to measure the stigma effect. However, the Swedish police’s listing of ”vulnerable” neighbourhoods, introduced in 2015, lacked accompanying resources, offering a unique opportunity to examine the isolated impact of place-based policies on stigma. We study the stigma from unfavourable area labels through an analysis of how the police list affected housing prices - a reliable measure of location value. Employing the synthetic control method, we find that the list resulted in an average price decrease of 3.7% within one year and 6.5% within six years in the designated neighbourhoods. In line with ideas of racial stigma, we also find that areas with a higher proportion of minority residents before classification experienced more pronounced negative effects.

India's tax revenue performance remains sub-optimal despite several tax reforms initiated by the government. One aspect of low tax compliance that policymakers in India have overlooked is the taxpayers’ moral sentiments towards tax payment, which is captured through the tax morale concept. Tax morale helps in explaining why taxpayers voluntarily pay taxes even when standard deterrent factors such as audits or penalties are absent. Therefore, understanding the factors influencing tax morale can help implement appropriate policies to improve tax revenue productivity by better understanding tax compliance behaviour. In this context, this paper aims to examine the factors determining tax morale in India using an independent survey. The results reveal that tax morale in India is shaped by age, participation in groups or associations, employment and income status, level of financial satisfaction, tax burden, trust in government, national pride, efficiency of public spending, and level of corruption.

This study investigates how the two main types of risk-based audits (face-to-face examinations and audits conducted by mail) impact future taxpayer reporting behavior using a large and unique data base that includes granular tax return information as well as risk indicators used for audit selection on audit and comparison samples of self-employed US taxpayers. We employ difference-in-differences estimation with entropy balancing to assess effects on the distribution of reported taxes, as well as mean dollar and percentage changes. We find that face-to-face audits are consistently effective in improving post-audit compliance. However, the impact of audits conducted by mail (correspondence audits) is more nuanced and depends on the timing of the audit. This pattern persists even after controlling for key differences in tax issues subject to examination at different points in the audit cycle, suggesting a need for further investigation into the optimal balance between face-to-face and correspondence audits.

We analyse whether agreements on information exchange had measurable effects on the economy of tax havens. As GDP data are missing for many small tax haven jurisdictions, we use night light data as a proxy for economic activity. Using this proxy allows us to increase the number of tax haven jurisdictions by up to 25 percent compared to using GDP. We find that tax havens which have signed more tax information exchange agreements experienced a significantly higher economic activity, as proxied by the sum of night light emissions. When we use GDP as a measure of economic activity, tax information exchange agreements are not associated with a differential development of economic activity. Both observations suggest that information exchange treaties so far have not reduced economic growth in more cooperative tax havens.

I investigate the determinants and consequences of the rise of tax havens using a novel database that tracks the creation and development of offshore legal institutions in 48 tax havens. After describing the evolution of tax havens in the 20th century, I explore the causal determinants of their emergence. Building on the idea that tax havens are the suppliers in the market for offshore services, I show that offshore services demand shocks explain why countries become tax havens. I also find that competition shocks explain why tax havens update their regulations. This reaction is facilitated by the diffusion of legal technologies across tax havens. Finally, I show that a country’s becoming a tax haven generates per-capita GDP gains and domsetic sectoral reallocation. In turn, nonhaven countries’ tax structure is affected by the rise of tax havens, resulting in an increased tax burden on labor relative to that on capital.

To understand how global firm networks operate, we need consistent information on their activities, unbiased by their reporting choices. In this paper, we collect a novel dataset on the light that factories emit at night for a large sample of car manufacturing plants. We show that nightlight data can measure activity at such a granular level, using annual firm financial data and high-frequency data related to Covid-19 pandemic production shocks. We use this data to quantify the extent of misreported global operations of these car manufacturing firms and examine differences between sources of nightlight.

Forty percent of the global FDI stock is hosted in tax havens and nearly all of them are concentrated in 6 conduit countries, while their share in the world economy is hardly 4%. These abnormal FDI patterns suggest that FDI and international corporate tax avoidance are closely related. The conduit countries benefit from stringent anti-BEPS polices by high tax countries towards traditional tax havens, such as CFC-policies and withholding taxes on international income flows. Multinational firms can escape these unilateral policies by establishing intermediate holdings in conduit countries without or more lax anti-BEPS polices. The regression analysis shows that the rise in unilateral CFC-policies the last decade has stimulated FDI to conduit countries, and this process slowed down in Europe after the implementation of EU-wide CFC-policies included in the ATAD1-directive.

We study the interaction of climate policies and investments into black and green energy generation capacity if policies are set by elected governments and can lead to stranded assets. Within an overlapping generations model, elections determine carbon taxation and green investment subsidies, and individuals make investments into energy capacity given an uncertain election outcome. Some black investments become stranded assets, if the party offering the higher carbon tax is unexpectedly elected. If the party representing the young generation is in power, it can use a high subsidy to reduce or even avoid potentially stranded assets in the next period. With endogenous reelection probability, we show that this party can also use investment subsidies strategically to influence the elections. The party that represents the old generation abstains from both types of climate policies to avoid a redistribution of income towards the young generation.

This paper investigates the role that domestic elections play for IEAs and to what extent they might be an explanatory factor for the modest success of international cooperation on climate change mitigation. Agents involved in international negotiations are often subject to domestic electoral concerns and therefore, policy decisions might affect their chances of reelection in upcoming elections. Also, international treaties usually last beyond a governments’ incumbency, which implies that the negotiation and ratification decision might be made by two different entities. I formulate a 4-stage game in order to analyse the arising strategic incentives depending on the level of political polarisation. I find that incumbent governments mostly choose suboptimal treaties compared to if there was no election in order to boost their chances of reelection. Additionally, I find that increased political polarisation generally leads to more distorted treaties and worse outcomes from the perspective of the median voter.

We study the formation of international climate coalitions. Countries are farsighted and rationally predict the consequences of their membership decisions in climate negotiations. We offer an approach to characterise the equilibrium number of coalitions and their number of signatories independent of their heterogeneity, and we suggest a tractable algorithm to fully characterise the equilibrium. In a dynamic game analysis of an integrated assessment model of the economy and the temperature dynamics, if the policymakers are patient enough and the number of countries is not too large, the number of signatories in all climate treaties is a Tribonacci number. In general, we investigate possible coalition structure outcomes for a calibrated model. In contrast to earlier approach based on internal and external stability, much larger coalitions can be sustained in equilibrium and coalitions of different sizes can co-exist alongside each other.

This paper analyses the effects of altruism on the formation of climate coalitions in the standard two-stage game of self-enforcing international environmental agreements with identical countries. Altruism implies that each country values, to some extent, every other country's welfare when deciding on its coalition membership and emissions policy. In the Nash [Stackelberg] game, altruism decreases [increases] the coalition size. In any case, global emissions and global welfare are close to the non-cooperative values. However, altruism narrows the gap between the individually optimal emissions and the socially optimal emissions, so altruism increases global welfare.

The effects of altruism on the formation of climate coalitions crucially depends on its modelling: If altruism affects the membership decision but not the policy decision, or if each coalition country is more altruistic toward other coalition countries than toward fringe countries, altruism can stabilise large coalitions up to the grand coalition...

We study inequality decomposition by population subgroups. We define properties of a satisfactory decomposition and derive the implied decomposition formulas for well-known inequality indices. We find that the Gini coefficient, the generalized entropy indices, and the Foster-Shneyerov indices all admit satisfactory decomposition formulas derived from a common set of axioms. While our axiomatic approach recovers the established decomposition formulas for the generalized entropy and the Foster-Shneyerov indices, it leads us to a novel decomposition formula for the Gini coefficient. The decomposition of the Gini coefficient is unique given our axioms, easy to compute, and has both a geometric and an arithmetic interpretation.

What happens to earnings upon marriage? Linking administrative and survey data from Germany, we show that there is a marriage earnings gap. Even after accounting for the child penalty, women's earnings drop by 19% after marriage.

We show that the marriage earnings gap results from both the extensive margin (women stop working) and the intensive margin (women work fewer hours), but not from a decrease in hourly wages.

We then study mechanisms behind the observed spousal behavior. Labor supply disincentives from joint taxation can explain about one third of the marriage earnings gap, while we find no effect for labor supply incentives from changes in divorce law. Leveraging variation in norms created by the German separation, we find that gender norms are another important driver behind the marriage earnings gap.

We study top-income persistence in Finland using detailed full-population register data spanning over 20 years. During this period Finland has experienced significant increase in top income shares, particularly within the top percentile. This raises interesting questions: How persistent are the top positions, and do we observe changes in persistence over time? We find that top-income persistence has increased, being more pronounced than the growth of the top income shares. Moreover, our data enable the study of different income concepts such as gross income vs. disposable income and the importance of capital-income components, which allows discussion on the role of our dual income tax system. We provide average income tax rates at the very top of the distribution to illustrate the decrease in income tax progressivity over this period. In addition, we also characterize the evolution of top-income persistence for the self-employed, males and females, and persons of different ages.

This paper provides a household-level perspective on the rise of global saving and wealth since the 1980s. We calculate asset-specific saving flows and capital gains across the wealth distribution for the G3 economies -- the U.S., Europe, and China. In the past four decades, global saving inequality has risen sharply. The share of household saving flows coming from the richest 10% of household increased by 60% while saving of middle-class households has fallen sharply. The most important source for the surge in top-10% saving was the secular rise of global corporate saving whose ultimate owners the rich households are. Housing capital gains have supported wealth growth for middle-class households despite falling saving and rising debt. Without meaningful capital gains in risky assets, the wealth share of the bottom half of the population declined substantially in most G3 economies.

Illicit financial flows, including aid diversion, remain a critical challenge for developing countries, draining vital resources and impeding sustainable development. With a considerable number of aid-receiving nations facing high corruption levels, concerns arise about the aid reaching its intended destination. In this paper, we study the impact of enhanced financial transparency on aid diversion induced by global efforts advocating for greater transparency in the financial system of tax havens since 2009. We examine the relationship between changes in foreign bank deposits linked to aid disbursements in aid-dependent countries. Our results indicate that the global push to end bank secrecy positively influenced the diminishing effect of aid capture, particularly after 2008, coinciding with the initial release of customer information from tax havens. The findings have significant implications for the allocation of foreign aid, especially in aid-dependent countries involved in offshore leaks and with high degree of corruption.

We analyze the impact of public disclosure of politicians' outside income on their income, following the implementation of disclosure regulations for German federal MPs. We use administrative tax return data and a difference-in-differences design with unaffected state MPs serving as the control group. We show that MPs increased their outside income once this information became publicly available. Using a proxy for party membership, we find evidence that right-wing MPs drive the effect. To explain this finding, we conducted a survey experiment among German voters, which revealed that the interpretation of moderate outside income varies along party lines. Specifically, right-wing voters perceive outside income as a sign of competence, whereas left-wing voters believe that such politicians are less likely to represent their constituents effectively.

Non-profit entities that meet certain earnings and asset thresholds are required to publicly disclose the compensation of certain employees whose taxable earnings exceed $100,000. We use empirical bunching techniques and administrative data to estimate the behavioral response of taxpayers to this transparency threshold. We bound the willingness to pay to avoid salary transparency between $173 and $3,695 of pre-tax earnings. These results suggest that taxpayers and firms are likely to value salary confidentiality.

This paper studies the effect of leaks of confidential offshore documents on the value of the implicated firms. Using the International Consortium of Investigative Journalists’ Offshore Leak Database, I identify 206 publicly traded firms connected to the implicated offshore firms. I use propensity score matching to identify similar non-implicated companies and assess the leaks’ impact on the stock prices of both groups using an event study methodology. I find that implicated firms have 1.5% lower cumulative abnormal returns during the event window compared to similar non-implicated firms. I estimate that the implicated firms lost an average of USD 105 million in stock market value following the leaks.

This paper conducts an incidence analysis of the value-added tax (VAT) in high-informality countries. While consumption taxes have traditionally been considered regressive, recent research suggests they might be progressive under specific assumptions regarding pass-through of taxes to prices and household shopping behavior. We use high-frequency price data from partially informal markets in Peru and a temporary VAT exemption to calculate pass-through in the informal sector, and household survey data to analyze consumption patterns across the income distribution. Results show pass-through in informal markets varies by product (from 0% to 100%), and that households in the bottom 10% of the income distribution spend about 34 percentage points more on informal markets than the top 10%. We use these findings to recalculate VAT incidence in high-informality countries and develop a model to explain this.

While distributional tax incidence has been frequently studied in the literature, little is known about how the rents of evasion are split between consumers and producers. While some theoretical general-equilibrium models would predict factor prices adjust so that firm owners do not benefit from evasion in equilibrium, we have very limited empirical evidence, which so far has only been based on online surveys or imperfect natural experiments. This project aims to quantify the incidence of evasion by conducting an innovative, face-to-face, survey-based field experiment in Italy. Thanks to a randomized treatment design, we elicit average price differentials by the method of payment in order to back out what portion of evaded taxes are passed on to consumers.

In this paper, we study the effect of cross-border tax differentials on fuel tax pass-through and sales responses. Using regional variations in diesel taxes and a comprehensive dataset of diesel prices for all petrol stations in Spain, we find that diesel tax pass-through is asymmetric depending on the sign of tax differentials relative to cross-border competitors. Our estimates reveal that petrol stations on the high-tax side of borders only shift 56% of fuel taxes into prices, while those on the low-tax side exhibit a pass-through of 120% of fuel taxes. In line with spatial pass-through responses, we find substantial spatial fuel tax avoidance responses to cross-border tax differentials. Our findings suggest that spatial fuel tax differentials play a significant role on the geographical distribution of the burden of fuel taxes and contribute to substantial fuel tax avoidance behavior, which may pose challenges to the effectiveness of fuel taxation to reduce CO2 emissions.

This paper explores how optimization frictions in supplier price-setting affect tax incidence. We use a natural experiment that varied the effective hotel tax rate in certain cities at different times to document heterogeneity in tax pass-through using multiple proxies for price-setting acumen. Pass-through is lowest for sophisticated hosts whose prices before the policy closely follow local hotels. In contrast, less sophisticated hosts are much less likely to adjust their pre-tax price, passing the entire tax burden onto consumers. Further investigation suggests that the behavior of these hosts can be delineated into inattention (failure to change price) or lack of skill in price setting which have distinct consequences for demand. Finally, we find that this policy affected market composition, with net entry skewing toward more sophisticated hosts after the policy. We develop a model for welfare analysis which incorporates supplier salience and other price setting optimization failures.

We analyze whether mayors’ prior occupation in the local public administration matters for their performance. In theory, mayors’ professional background may shape their competence in bureaucratic tasks. We use the example of grant receipts for visible investment projects for which mayors must submit an extensive application to the state government. Our dataset includes 1,933 mayor elections (1993-2020) in the German state of Hesse to which we apply a sharp RD design for close mixed-background races. Mayors’ background on average has no effect on grant receipts. Yet, public administrator mayors do attract more grants than outsider mayors when they are ideologically aligned with the council, raising the motivation to apply for grants in the first place. We conclude that the competence of public administrator mayors only matters when they are motivated to use it, i.e. this is an example where incentives are necessary for the effects of political selection to materialize.

We analyze the impact of Italy's OpenCivitas data disclosure program on mayoral behavior. Utilizing the program's website, we construct a network of mayors accessing expenditure data. Results show that younger, educated mayors from larger cities in northern regions, affiliated with traditional parties, are more likely to engage. Using directed dyadic models, we find mayors tend to link with similar-aged peers managing similar-sized cities in their region. Unlike neighboring municipalities, mayors within this network compete internally rather than engage in yardstick competition. We observe this network predates the website's launch, but after data disclosure, yardstick competition intensifies for re-election-seeking mayors within the network, contrasting with unaffected neighboring municipalities.

We study the reaction of low vs. high-skilled politicians - proxied by their educational attainments - to a reform that introduces financial and career penalties in case the local administration is deemed co-responsible for the bankruptcy of the municipality. We leverage plausibly exogenous variation induced by close elections between a mayoral candidate who holds a college degree and a mayoral candidate who did not attend college. To start, we document that graduate mayors on average implement a more responsible fiscal policy and are more capable of attracting external resources to the municipality's budget. Upon the introduction of penalties, however, skilled politicians tend to declare bankruptcy with a higher probability than low-skilled politicians. The effect is concentrated in the first year of the term.

We study the provision of information by local governments that supports individual compliance with nationwide regulation, and how this provision relates to the electoral process. We study this question using information about individual mobility (compliance with the lockdown) and Facebook posts by Italian local governments during the Covid 19 pandemic. We show that in municipalities where mayors were up for re-election, local governments provided significantly more covid-related information. This information caused a significant decrease in mobility and excess mortality. However, these effects seem to arise only in the northern regions of the country, where the impact of the pandemic was more severe.

This paper introduces wealth into the utility function in an otherwise standard dynamic optimal taxation framework. The optimal tax on capital income is positive in steady state. This stands in contrast to the classic results of Chamley (1986) and Judd (1985) where the optimal steady state capital tax rate is zero. When consumers get direct utility from their holdings of wealth, they are willing to accept a lower rate of return on those holdings: their intertemporal marginal rate of substitution (IMRS) is reduced. It is this reduction in the IMRS that drives the positive optimal capital tax rate in steady state.

This paper explores tax arbitrage incentives and behaviours in OECD countries, and their implications for tax systems more broadly. It focuses on how OECD tax systems might encourage business owners, in particular owners of unincorporated businesses and owner-managers of closely held incorporated businesses, to minimise their tax burdens through tax arbitrage. The paper finds that tax incentives to incorporate and earn capital income through corporations have increased in the last two decades. It shows that there has been an increase in incorporated businesses in many OECD countries, and that this has at least partly been driven by widening PIT-CIT differentials. The paper also finds that, in many countries, a combination of tax system features – related to corporate, dividend, capital gains and inheritance taxation – provide particularly strong incentives to retain earnings inside corporations.

Interest paid by U.S. state and local bonds is tax-exempt, making these bonds attractive to investors – though a tax rule limits arbitrage opportunities by restricting associated interest expense deductions. Prior to 1986, U.S. banks were not subject to the interest deduction limitation, making banks preferred holders of tax-exempt debt. U.S. banks used tax-exempt debt to reduce their tax liabilities by roughly 20% in the 1950s and 45% in the 1960s, rising to as much as 80% by the early 1980s. Despite their special exemption, and in part because of their widespread holdings, banks did not benefit from investing in tax-exempt bonds, as competition between banks reduced bond yields to the point of investor indifference.

I develop a theory of the jointly optimal choice of nonlinear income taxes and commodity taxes which accounts for the presence of tourists. If commodity taxes are uniform, the Pareto efficient rate is the one that maximizes revenue from tourists. Impacts of a uniform commodity tax on residents are irrelevant, as they can always be compensated through income tax changes. However, the presence of tourists in the tax base overturns the classic Atkinson-Stiglitz result justifying uniform commodity taxation. Efficient rate differentiation is characterized by a Corlett–Hague-style rule which requires placing lower taxes on goods which tourists can more easily substitute for expenditures outside of the destination economy. Notably, the impact of commodity taxes on residents do not influence the pattern of efficient differentiation nor of the overall level of commodity taxation. Taxes should also be lower on goods consumed by tourists who are highly responsive at the extensive margin.

We study the behavioral responses, fiscal consequences, and housing market reactions that result from raising a tax on second homes. To this end, we compile data on German municipalities and apply staggered difference-in-differences methods. Our results suggest that people (massively) avoid the second home tax by changing their status of registration. As a consequence, we observe a rise in the number of primary residents registrations, which in turn increases formula-based intergovernmental transfers. We do not find evidence for housing market responses.

This study provides new econometric evidence on the effects of holiday vouchers on the development of the domestic tourism sector and on their advantages and disadvantages. We use an unexpected policy change that took place in Romania and made mandatory the provision of holiday vouchers for all public sector employees, which increased eight-fold the value of holiday vouchers used. Using novel firm level data on payments in holiday vouchers and difference-in-differences methods, we show that this policy significantly increased the revenues and employment of firms in tourism sector that used holiday vouchers compared to similar firms that did not use them. Regarding the underlying channels, we show that holiday vouchers increased tourism related economic activity in less touristic regions, but in the most touristic regions, they, mainly, increased prices and prolonged the touristic season. They also increased income declaration of the firms most exposed to informal economy.

Tourism is a key income source for many businesses and policy makers alike while also exerting negative externalities to local economies. We provide novel causal evidence on how local taxation of overnight stays among German local governments affects tourist flows. Using event study analysis and synthetic differences in differences we show that taxing overnight rates of hotels decreases hotel occupancy rates at the municipality level. Touristic towns, however, have less elastic demand responses to tourist taxes. Exploiting large-scale scraped hotel price data from booking.com, we show that there is indeed substantial pass-through of tourist taxes on hotel overnight rates.

Governments grapple with the intricate task of designing income tax systems that balance various trade-offs. Concerns about distortionary impacts on labor supply, tax evasion, and income redistribution have prompted many countries to abolish progressive income taxes, introduce flat-rate systems, and reintroduce graduated tax schemes over the last few decades. This paper investigates the effects of transitioning from a flat to a progressive income tax system, utilizing a significant 2007 tax reform in Uruguay. Our research design employs cross-sectional variation in tax changes and administrative records to implement a difference-in-difference approach. Results reveal asymmetric responses to tax rate changes, with workers who experienced tax reductions (winners) reporting increases in labor earnings, while those who faced tax increases (losers) exhibited declines in earnings. We find indicative evidence that changes in labor earnings reflect reporting responses rather than real labor supply adjustments, particularly for winners.

In order to analyse recent trends in labour supply in Germany, I estimate a static discrete choice model of unitary household labour supply for each year 1998 to 2018. I find that the own-wage labour supply elasticities implied by the models have increased over the last two decades, especially for couples around the turn of the century and for single males. While females became less sensitive to their partner's wage, the responsiveness of males to the partner's wage slightly increased. In a decomposition analysis, using counterfactual model-data combinations, I find that compositional changes in demographics play only a minor role in the shift in males' own- and cross-wage elasticities, since most of the change in elasticities is driven by preferences or labour market restrictions. For females, changes in composition play a bigger role in the rise of elasticities.

This study examines how differential tax treatment affects the transition from employment to self-employment, using administrative data from Poland. In 2004, a significant tax cut for business owners reduced their top marginal rate from 40% to 19%, while employees remained subject to a progressive schedule with a 40% top rate. The reform led to a 17% increase in high-income employees switching to self-employment within five years, particularly among the highest earners. The transitions were mainly to long-term solo self-employment in high-skilled service industries. A subsequent 2009 reform reducing the tax differential temporarily decreased entries to self-employment, but those who had already switched did not return to employment. These findings suggest that large tax differentials increased self-employment's attractiveness as an alternative to employment, but also increased the proportion of self-employed who do not hire workers.

How does economic activity respond to tax shocks and how do these responses depend on the distributional targeting of the tax change? We shed light on the potentially stimulative effects of tax cuts using thirty years of US tax filing data. Focusing on state income taxes, we show that state-level measures of employment respond positively to tax cuts targeted at the bottom of the income distribution, but find no evidence that economic activity responds to tax shocks aimed at the highest earning households.

This paper analyses the impact of intergovernmental transfers on economic development in Indian states from 1990 to 2020 using panel fixed effects models. Our analysis challenges the conventional belief that transfers promote economic growth. Instead, our findings reveal a counterintuitive result: transfers may hinder economic development, particularly in special category states. This suggests that rather than fostering economic convergence, transfers have a growth-depressing effect on these regions. There are differences between general and special category states, with transfers having no significant impact on economic growth in the former and adverse consequences in the latter. It emphasizes the importance of understanding the relationship between fiscal transfers and economic development, particularly in transfer-dependent regions. As India continues to evolve its policies, our findings call for a closer examination of how states utilize transfers. These insights are crucial for policymakers to foster balanced and sustainable growth and reduce regional disparities.

We estimate the impact of expenditure decentralization on economic activity and public service delivery in the context of a nationwide reform in Indonesia. The Village Law of 2014 empowered one type of villages (desa) to provide health, education, and infrastructure services while providing unconditional fiscal transfers to fund these services. The other type of villages (kelurahan) saw no change in responsibilities or resources. Using a semiparametric difference-in-differences design, we find that decentralization temporary disrupted economic activity but eventually led to modest gains, as measured by nighttime luminosity. Future drafts will examine the impacts on public service delivery, as well as heterogeneous effects according to local administrative capacity.

We examine the impacts of alcohol sales restrictions on alcohol sales and broader welfare implications. We focus on the role of government alcohol monopolies in an environment where limited alcohol sales are allowed outside of the monopolies. We utilize a reform that relaxed the restriction on alcohol sales outside of the monopoly and smaller changes in alcohol tax rates. We study the impact of the reform on total sales as well as substitution and spillover patterns across product categories and different types of stores. Our results indicate very large substitution between different product categories and also between the state monopoly and private stores. We also find evidence of spillover effects to the sales of more distant product categories that are not directly affected by the reform. The total alcohol consumption does not seem to increase during the reform. These effects entail a welfare loss originating from alcohol sales restrictions.

A strong economic case can be made for public support for research. In this paper, which is work in progress, we focus on expenditure- and income-based tax incentives, which have both been used increasingly in OECD countries and elsewhere since the early 2000s. We use macrodata-based analyses to make three contributions. First, we bring together recently published data on expenditure- and income-based tax incentives regimes within a common empirical framework. Second, we analyze the impacts of income-base tax incentives regimes on R&D activity, as opposed to patent applications. Third, we present an evaluation of the impacts of BEPS Action 5 on the effectiveness of IBR, notably compared to XBR.

I show that public funding significantly improves the financing situation of young firms by exploiting variation in access to public funding under the largest German regional policy scheme. My results based on a shock-based difference-in-differences research design indicate that the probability of experiencing financial constraints decreases by about 10% to 19% for treatment firms relative to control firms, depending on whether the funding instrument is a subsidized loan, a public loan guarantee, or a grant. The effect is heterogeneous not only across instruments but also across capital providers. In addition, I find that public funding is associated with higher employment and revenue growth, as well as higher research and development expenditures and, for recipient firms of grants, higher investment.

Water is an increasingly scarce resource. However, in many multi-family buildings, water is included in the rent and tenants can consume an unlimited amount at a fixed cost, with no monetary incentives for saving water. Using high-frequency data over multiple years and a staggered implementation of apartment-level billing, we investigate the effects of volumetric pricing on hot water use. Our results show that individual billing decreases hot water consumption by 18%. The response is rather immediate and appears to be permanent. Additionally, estimated effects are remarkably homogeneous across different consumption quartiles, apartments with varying characteristics, and days of the week, and evenly distributed between bathroom and kitchen usage. Our cost-benefit analysis indicates that price interventions can cost-effectively reduce the consumption of hot water. Moreover, the effect of individual billing is of an order of magnitude higher than previously estimated effects of non-pecuniary incentives and providing more information about water consumption.

We use transaction-level card expenditures to estimate the effect of Germany’s temporary value-added tax (VAT) in 2020. We use card expenditures in Austria as control because no analogous VAT cut was implemented in Austria and spending of Austrian households provides a stable benchmark to compare spending of German households against. As predicted by consumption theory, we find the VAT cut in-creased consumption growth more for durable goods, with a stronger effect close to the end of the cut. The annualized growth rate of expenditures for durables increased by 7.5 percentage points (pp), with a particularly strong increase of up to 23.6 pp for consumer electronics. The consumption growth rate for semi-durables increased by 5.6 pp, and for non-durables by 2.6 pp. The implied effect on durable spend-ing is four times smaller compared to survey-based estimates in Bachmann et al. (2023), and a fiscal shortfall that is 23 bn larger.

Changes to loss offset rules are often used as a fiscal stimulus measure in times of crisis to alleviate firms’ constraints and support the economy. The effect of these measures has been assessed in the literature using large listed firms, but there is no evidence on the effect of these policies on small private firms. I study a temporary change in the loss carry-back period implemented in the Netherlands over 2009-2011 using administrative and tax return data on small private corporations. Using a difference-indifference set up and matching techniques, I show that an additional year of carry-back has a significant effect on treated firms’ investments, but no significant effect on firms’ survival, employment and profits. The effect on investments is not driven by equity injections but rather by debt increases. Crucially, the significance of the effect on investments is conditional on the

size of the additional carry-back.

Using quarterly data on UK government spending forecasts alongside the household surveys dating back to 1977, we provide new evidence on heterogeneous effects of government spending policies on household consumption. Specifically, while at an aggregate level the on-impact consumption multiplier is about 0.5 and the effect fades only gradually, the consumption effects of spending shocks are substantially greater for (1) households with mortgage debt and (2) households in the left tail of the income distribution. As is well known, mortgagors, unlike outright homeowners, tend to have large illiquid assets, but little liquid wealth. Our results thus suggest that household balance sheets, together with their income levels, play a key role in the transmission of government spending policies in the UK.