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

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

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

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

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

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

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

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

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

Building fiscal capacity requires that the state obtain compliance with its tax demands, a struggle for weak states that lack enforcement capacity. One potential option for leaders of weak states is to establish political legitimacy and thereby foster voluntary compliance. In this study, we report results from a phone-based participatory budgeting policy experiment in Sierra Leone that attempted to build legitimacy and fiscal capacity by inviting public participation in local policy decision making. In phone-based town halls, participants shared policy preferences with neighbors and local politicians and then voted for local public services that were subsequently implemented. We find that the intervention increased participants’ perceptions of government legitimacy. However, against influential models of tax compliance, we find a robust null effects on tax compliance behavior. In exploratory analyses we find that preexisting attitudes towards paying taxes and partisan affiliation strongly condition tax compliance behavior and attitudes towards paying taxes.

To achieve better tax compliance, the Russian government required small firms to use online cash registers (OCRs) for business-to-consumer transactions from 2017. The main goal of the OCR policy in Russia is better tax compliance. For firms, the installation of the OCR leads to an increase in fixed costs. This might push firms to switch to the shadow market (partially or fully), to exit the market, to report more costs and less profits, or to combine several strategies. Using the Difference-in-Difference technique, on the firm level, I estimate the effects of the OCR policy on reported profits, profits tax, and firms' exit decisions. Exogenous variation for causal inference is possible thanks to different years of policy implementation (2017, 2018, 2019). I find that firms tend to exit the market after OCR policy implementation and report less profits, and slightly higher wages, and there is no effect for VAT and profit tax.

This paper examines Spain's fiscal capacity at the provincial level between 1904 and 1934, utilizing a unique dataset on provincial tax series. Three tax indicators are constructed, focusing on real total tax revenues, real tax burdens per capita, and real tax burdens as a percentage of GDP for the 48 provinces. The study addresses where taxes were paid and how tax indicators evolved in early 20th-century Spain. Results reveal that Madrid and Barcelona led in tax revenues and per capita tax burdens during this period, with increasing concentration in top-contributing provinces. Additionally, tax burdens as a percentage of provincial GDP were generally low nationwide, but relatively higher in Madrid due to a "capital" effect. Decreases in tax burdens suggest Spain had an inelastic tax system and limited fiscal capacity, relying on urbanized provinces for revenue while taxing agrarian provinces less.

This study explores the impact of economic crime, particularly counterfeiting in Italy post the Great Recession (2008-19). Mafia-led counterfeiting, prevalent in Italy, significantly damages authentic brands and worsens regional economic disparities. Using a unique regional dataset, two main effects of counterfeiting are identified: firstly, it reduces unemployment in struggling areas, contributing to short-term economic growth by flooding the market with counterfeit goods. Secondly, it undermines market modernization and growth by violating intellectual property rights of legitimate innovative firms. The interplay of these effects results in a dynamic pattern, initially boosting GDP through the informal economy, but ultimately hindering long-term growth. The study highlights the need for effective policies to curb the short-term positive impact of economic crime and guide Italy towards sustained modernization and reduced crime rates.

This paper assesses key issues with the effectiveness, efficiency, and equity of the value-added-tax (VAT) in Indonesia using privileged access to a nine-year long panel dataset of VAT micro-level administrative data for 2011-2019. We derive eleven key findings on the real-life workings of the VAT in Indonesia, providing insights on key policy and administration issues, including on the VAT threshold, VAT preferential regimes, VAT credits/refunds, and VAT filing. Insights from this analysis served as an input into VAT reforms proposals put forward by the government of Indonesia as part of its fiscal consolidation efforts following the Covid-19 pandemic, which were legislated in the Tax Harmonization Law 7 of 2021.

The Value-Added Tax (VAT) system is globally adopted due to its perceived self-enforcing nature along the production chain. However, evidence on the chain effect on enforcement is limited. We investigate a presumptive tax reform in China's agricultural product processing industry and evaluate the enforcement effect throughout the production chain. Employing administrative tax return data from 2009 to 2015 and a staggered difference-in-differences estimation strategy, we show that the reform increased VAT revenue by 28.5% and decreased taxable output in the treated group. This upstream crackdown on VAT evasion significantly impacted enforcement along the VAT chain: downstream food wholesale and retail remitted 12.7% more VAT; furthermore, exporting refund claims, a vulnerable aspect of VAT collection, decreased by 28.3%.

Using a quasi-experimental setting, we document that corporations decrease declared profits and corporate income taxes in response to an increase in the VAT rate. In an attempt to raise tax revenue during the Greek economic crisis, a 16% VAT rate, which existed for historicopolitical reasons in Greek islands, was harmonised to the national 24% rate. We combine tax filings with Orbis and ICAP data that enable us to geolocate corporations and to construct comparable groups based on locations in or out of the preferential rate. Counteracting the reform’s intended effect, declared profits decreased by 28% and corporate income taxes by 34% on a permanent basis. Macroeconomic factors and a fall in reported revenue cannot fully explain this decrease. Pervasive tax evasion in the Greek islands, where corporations might have an opportunity to adjust profits, offers a plausible explanation of the magnitude of responses.

VAT efficiency is shaped by multiple factors. Especially provisions that are diverging from the harmonized European Union model may influence collection performance. The latter include tax expenditures which are considered to be an alternative to direct spending and therefore should be incorporated in the process of making budgetary decisions. This paper attempts to examine tax expenditures in France, Germany and Poland. It contains a comparative analysis of their selected features. It is aimed at addressing the following questions: what are the differences between the countries when it comes to the classification of tax preferential treatments? what are the main VAT expenditures and revenue loss incurred by the largest of them? While enquiring into the concept of VAT expenditures it gives consideration to the degree of diversity in their assessment, structure, scale and value. The paper illustrates a need for increased transparency of tax expenditures evaluation and unification of adopted measures.

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.

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.