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

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

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

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

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

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

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

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

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

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

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

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

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

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

As a multinational enterprise’s (MNE’s) location choice is based on not only fiscal incentives by host countries but also better quality of transport infrastructure such as ports, governments’ policy designs on them seems tightly associated. This study investigates the impact of fiscal competition between equal-sized countries with different numbers of local firms to attract an MNE on public infrastructure. Our model divides transport costs into infrastructure-independent and infrastructure-dependent parts, and investments in infrastructure reduce the latter costs. We show that the MNE locates in a country without local firms irrespective of fiscal competition. Moreover, our result shows that fiscal competition increases countries’ investments in infrastructure under low infrastructure-independent transport costs. As investments in infrastructure generate positive spillovers, fiscal competition improving transport infrastructure benefits the non-host country and improves global welfare. It is also shown that the host country benefits from fiscal competition although it pays a subsidy for the MNE.

This paper studies international tax competition and answers the questions: Which countries are in competition with one another, and what is the structure of this competition? How did the set of competitors and the strength of competition evolve over time? How would the introduction of a global minimum corporate tax rate affect tax rates around the world? To answer these questions we employ Adaptive Elastic-Net Generalized Method of Moments (AdaENet-GMM) estimators to endogenously infer the tax competition network from global tax regime data covering the period from 1980 to 2020.

This paper explores the effects of a federal law that obligates previously unregulated municipalities in Germany to set a minimum tax rate on firms’ taxable profits. In particular, we examine the tax-policy response of municipalities that compete locally with “tax-haven municipalities”, i.e. municipalities that originally have set lower and, in some cases, even zero tax rates. The analysis distinguishes treated and not-treated municipalities based on their distance to a tax-haven. Our results show that the majority of municipalities do not change their tax policy. Apart from the tax-havens, only high-tax municipalities show a response – they reduce the business tax rate without experiencing a decline in tax revenues.

In a symmetric n-country version of the Kanbur-Keen-model, we study a club obliging members to levy a common tax (additive to their own) on luxury goods, which is redistributed lump-sum to the members. By joining the club, a country engages in a form of flexible Stackelberg leadership raising the tax rates of all countries. In an alternative proposal, the club-tax revenue is used to fund reductions in carbon emissions. Non-participants are induced to raise their tax rates, as the resulting revenue leakage to club members causes emission reductions that benefit all. This effect grows in the club's size, motivating countries to join it. In an illustrative empirical calibration, there is a Subgame Perfect Equilibrium with full participation for tax rates up to 25%. If 7 or more countries are engaged in the tax competition, more tax revenue gets raised than what is achievable via the club rebating the revenue internally.

We provide evidence for the heterogenous relationship between GAAP effective tax rates and firm value. Our findings document, based on hand-collected information from 3,750 tax recon-ciliations of large listed European firms, that ETR components differ in their relevance for firm value. Effective tax rate reductions related to the management or accounting for tax losses are associated with a significant increase in firm value, whereas profit shifting and all other com-ponents have, on average, no significant impact. We show that tax-motivated profit shifting has even negative value implications for firms with high ESG scores as well as very large firms.

The EU's recent implementation of a public Country-by-Country Reporting (CbCR) regime under Directive 2021/2101 aims to fortify tax compliance and transparency for multinational enterprises (MNEs). However, its effectiveness relies on its consistent implementation across individual member states and a non-discriminating treatment of EU and non-EU firms. Our study examines these critical dimensions, uncovering disparities among member states regarding reporting scope and format. Furthermore, it underscores a predominant representation of EU-based firms among the affected entities, prompting apprehensions regarding potential discrimination. These findings highlight early challenges and implications of the EU's CbCR regime, offering valuable insights for policymakers. Amid current discussions on public CbCR in the USA and Australia, and sustainability reporting, our research contributes to the broader discourse on tax transparency and fairness within and beyond the EU.

This paper uses newly available microdata from country-by-country reporting (CbCR) to study the profit-shifting behavior of large French multinational firms. We provide a strong methodology to correct CbCR from double counting of intra-group dividends, which we show inflates observed pre-tax profits by about 13%. Using corrected data, we show that about 26% of foreign profits are shifted for tax reasons globally, with one-third going to four tax havens. Finally, we provide evidence on the concentration of profit shifting in the hands of a few large firms: 20 multinationals account for 90% of all shifted profits.

The 2017 Tax Cut and Jobs Act reduced the US corporate tax rate and introduced provisions to curb profit shifting. We combine survey data, tax data, and firm financial statements to study the evolution of the geographical allocation of US firms’ profits after the reform. The share of profits booked abroad by US multinationals fell 3–5 percentage points, driven by repatriations of intellectual property to the US. The share of foreign profits booked in tax havens remained stable at around 50% between 2015 and 2020. Changes in the global allocation of profits are small overall, but some firms responded strongly.

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

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.