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

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

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

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

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

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

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

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

We investigate how debt forgiveness and automatic wage garnishment following default impact labor supply. Analyzing total population register data from 2004-2019, we initially explore the effect of reducing debt enforcement duration from 20 to 15 years. Our treatment group comprises individuals with forgiven debts (enforcement duration 15+ years), while the control group consists of those with enforcement duration over 5 years. In a difference-in-differences approach, we find an 8% increase in labor earnings relative to the pre-reform control mean. Additionally, we analyze wage garnishment, where 33 to 50% of income exceeding a threshold is automatically garnished. Utilizing discontinuities in the budget set, we identify a labor supply elasticity varying between 0.006-0.08. Lastly, we develop a theoretical model of debt enforcement, estimating labor supply and defaulting elasticities, and demonstrate their relative importance through simulations.

This study explores the optimal nonlinear taxation of labor and entrepreneurial income, building upon the recent research by Scheuer (2014). It introduces a new element into the analysis: equilibrium unemployment. Our findings suggest that even when employment is an endogenous factor, it is possible for the government to redistribute income via taxation without compromising production efficiency. This can be achieved by separately taxing entrepreneurial and labor income. Furthermore, our results indicate that the inclusion of involuntary unemployment in the model provides a rationale for taxing entrepreneurial income at lower marginal rates, and labor income at higher marginal rates, than would otherwise be the case.

This paper studies how progressive taxation affects sorting patterns in a directed search model where both workers and firms differ in their productivity. By reducing the benefits of higher wages, progressive taxes lead workers to match with less productive firms. Furthermore, progressive taxes amplify the force of search frictions against positive sorting. As a result, stronger complementarities between firm and worker productivity are required to obtain positive sorting. Turning to optimal taxes, I show that accounting for firm heterogeneity raises the optimal degree of tax progressivity if productivity differences between firms exacerbate inequality between workers.

All countries except the US are mandating paid time off. In this paper, I provide a novel welfare analysis of any working time regulations. Labor is unbundled into jobs and hours worked while workers have heterogeneous preferences for leisure. First, I show that the wage effects of a working time reduction critically depend on the extent of imperfect competition in the labor market: the policy increases wage rates in perfect competition but decreases monopsonistic wage rates. Second, sorting in competitive search equilibrium reveals that high-productivity firms offer contracts with higher wage rates, shorter hours, and a higher job quality but lower job-finding probability. Third, it is shown that the key sufficient statistics for welfare evaluation are the elasticity of profits and employment to the working time reduction.

We study how the introduction of female suffrage affects political competition measured by the incumbency advantage. We link these phenomena through risk attitudes. We argue that the introduction of female suffrage might have increased risk aversion among the electorate. We study the staggered introduction of female suffrage in elections to cantonal parliaments in Switzerland. We use a regression discontinuity design to estimate incumbency effects and rely on a new measure of electoral closeness for proportional elections to construct our running variable. To identify causal effects, we combine regression discontinuity with differences-in-difference assumptions and implement a difference-in-discontinuity design. We document that the introduction of female suffrage had no systematic effect on the aggregate incumbency advantage of roughly 45 percentage points. However, we uncover that female incumbents tend to benefit from a 16.8 percentage-points higher incumbency advantage compared to men. We find no significant effects on party-specific incumbency advantages.

A key debate regarding British political development concerns the timing of the shift from a candidate-oriented electorate towards a party-oriented electorate. We study this evolution using individual-level registers of vote choices predating the Secret Ballot that cover around 90,000 vote choices in 21 English constituencies and span the years 1832-1868. We document strong persistence in vote choices: throughout the sample period, there were large groups of voters who remained loyal to Conservatives or Liberals between two consecutive elections. Yet, about one fourth of voters in our data change their vote choice. We find that this is more likely among voters who voted for an exiting candidate in the previous election than among those voters whose candidates re-ran. The effect of candidate exit on vote switching declines towards the end of our sample period, suggesting that voter alignment with parties was ultimately a process that was on-going throughout the mid-1800s.

This study examines the voting patterns of Mizrahi and Ashkenazi in ten general elections held since the early 2000s in rural and urban areas in Israel, utilizing a new classification method of origin of immigrants and their descendants based on surnames alongside the traditional classification by continent of birth. The study reveals relatively sharp fluctuations across elections in the size of origin gap in voting for right-wing party bloc between Mizrahi and Ashkenazi. According to the empirical analysis, the origin voting gap in the general elections held in 2022 was five times the gap found in the elections held in 2006, and more than twice that of the elections held in 2009. Sharp fluctuations in the voting gap undermine the protest vote hypothesis that discrimination against immigrants of Mizrahi origin in the past is the main factor behind their current political behavior.

Using a large randomized controlled trial and rich individual-level data on eligible voters and their household members, we evaluate how get-out-the-vote appeals affect inequalities in voting, transmit from treated to untreated individuals within households, and how the transmission of voting decisions through family networks influences inequalities in voting. We find that receiving a text message reminder before the Finnish county elections in 2022 mobilized mainly low-propensity voters, and thereby reduced existing inequalities in voting within the target group of young voters. We remarkably find that over 100 percent of the direct treatment effect spilled over to untreated household members. These spillovers reduced inequality also in voting among the older voters that were not part of the target group. Overall, our results exemplify how randomized controlled trials with a limited focus on the analysis of individuals in the treatment and control groups may lead to misestimating the compositional effects of get-out-the-vote interventions.

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 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.

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.