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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

gratuitous business transfers to employment requirements to analyze the effects

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

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

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

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

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

employment requirements affects employee outcomes both in the short run and

long run.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

This paper provides novel evidence on the relationship between corporate taxation and firm productivity measured by total factor productivity (TFP). Existing theoretical literature suggests several channels through which taxes can affect firm productivity. Nevertheless, empirical evidence is scarce. We investigate the relationship between corporate taxation and firm productivity - overall and across the distribution of firm productivity. We also analyze how different tax system characteristics affect the development of a firm’s productivity over time. Our findings suggest that a higher tax burden may drive the least productive firms out of the market and may decrease the probability of a firm moving up the productivity distribution over time.

We analyze the role of financing frictions for investment in R&D and innovation by building and estimating a structural investment model for privately-held, R&D-intensive companies -- a group for which reliable estimates of financing frictions have not been available in earlier papers. We use confidential administrative data from the UK to study the effect of a special policy that aims to address financing frictions and stimulate innovation. Profitable firms are offered tax super-deductions for R&D, while loss-makers are given a choice between taking a cash injection from the government immediately or when they become profitable in the future. We find that privately-held innovative firms face much higher costs of external finance than public firms and there are vast heterogeneities across different sub-groups of firms in their exposure and responses.

We develop a general equilibrium model to study how corporate tax avoidance affects firm policies and aggregate outcomes. Tax avoidance and investment are complementary inputs, leading the largest firms to engage in the most avoidance and face the lowest effective tax rates, consistent with the data. We find that tax avoidance significantly increases both the average firm size and concentration, disproportionately benefiting large firms. Tax avoidance also generates capital misallocation, lowering productive efficiency and welfare. We estimate the model to quantify the costs and benefits of tax avoidance and evaluate the equilibrium effects of changes to the statutory tax rate and costs of avoidance.

R&D tax subsidy schemes are prevalent policy tools to foster private sector R&D. Their key aim is to internalize positive knowledge externalities from private sector R&D. In this paper, we use rich accounting and patent data to establish that R&D tax incentives increase the private sector R&D of treated firms and induce knowledge flows to other entities in the economy. A significant fraction of these knowledge externalities, pertaining to around 50% of the overall knowledge spillover, is found to accrue at foreign firms. We offer a conceptual framework, which illustrates that our estimates imply that R&D tax subsidies decentrally set by national governments are inefficiently small from a global perspective, most likely by a significant margin. In additional analyses, we show that the identified positive cross-border knowledge externality outweighs negative cross-border effects related to the relocation of mobile R&D.

The answer is: we should tax capital income. This conclusion is derived by analyzing taxes on capital income and wealth in a standard two-period portfolio model with safe and risky assets with either idiosyncratic, individual risk or systematic, aggregate risk. Compensated tax reforms are analyzed where taxes on capital income are increased, while taxes on wealth are decreased. Such tax reforms are found to be welfare improving because taxes on capital income impose a non-distorting tax on the risk-premium, whereas taxes on wealth do not. Hence, for the same distortions, taxes on capital income generate more revenue than taxes on wealth. Optimal taxes on capital income and wealth are derived.

We study how a wealth tax and a realization-based capital gains tax affect capital market efficiency. We develop a two-period model with investors that are heterogeneous in both the value of an initial investment, and the future return on the initial investment. We show that the realization-based capital gains tax reduces the required rate of return on existing investment below the required rate of return on new investments, resulting in lock-in. A comprehensive wealth tax can eliminate this lock-in effect. We then develop an optimal-tax model that trades of equity gains from the capital-gains and wealth tax to efficiency losses related to intertemporal choice, and lock-in. We derive a criterion for the desirability of a wealth tax based on elasticities that can be estimated empirically. In addition, we find an upper bound on the optimal wealth tax. Finally, we consider an extension where long-run capital gains partially escape taxation.

For the coming years, the government in the Netherlands has announced a reform of the capital tax scheme: from the current scheme that taxes financial wealth towards a scheme that taxes capital income. This paper explores the economic and welfare effects of such a reform. I adopt different assumptions on the use of tax revenues, on household heterogeneity and on access to capital markets. In representative-agent versions of the model, the reform is found to be welfare-improving. In those versions that distinguish low wealth households from high wealth households, the reform continues to benefit the latter. Low wealth households, however, may be worse off on account of increased income volatility.

This paper revisits the debate on the welfare impacts of capital taxation, particularly challenging the prevailing notion that such taxes are universally harmful. Our study concentrates on estate taxation and investigates its welfare effects in an overlapping-generations (OLG) model, which uniquely incorporates a bequest motive. We introduce an innovative segregated economy model, delineating households into two distinct categories: workers and capitalists. This distinction allows us to uncover that the implications of estate taxes vary significantly based on whether households primarily rely on labor income or on inherited wealth. Also, for both cases, the effects of age-dependent inheritance taxes are very sensitive to the substitutability of bequests to children and bequests to grandchildren. Our results indicate that the after-tax rate of return on capital is not solely determined by traditional discount rates but is also significantly influenced by estate tax rates and the nature of bequest motives.

In times of hardship, politicians often leverage citizens’ discontent and scapegoat minorities to obtain political support. This paper tests whether blaming migrants for a health crisis affects social, political, and economic attitudes and behaviors. Through an online nationally-representative survey experiment in Italy, we analyze the effects of such narratives using information-provision treatments. Results show that narratives associating immigration with health threats do not generate sizeable add-on effects compared to those based on immigration only. If anything, they increase disappointment towards co-nationals, reduce institutional trust, and undermine partisanship among extreme-right supporters. Results are consistent with a theoretical framework where party credibility and institutional trust are influenced by political discourse. Our experiment underpins the prediction that political campaigns based on extreme narratives can be ineffective or socially and politically counterproductive, providing an example of how populism can backfire.

We examine the relationship between beliefs about and attitudes towards immigrants and intergroup contact between natives and migrants in eastern Germany, a region characterized by anti-immigrant sentiment. Using probability-based survey data, we randomly vary respondents’ access to a signal about the true size of the immigrant population in the region. Respondents who receive the signal show more supportive attitudes toward immigration, with effect sizes being more pronounced for attitudes toward high-skilled immigrants. Importantly, estimating conditional average treatment effects shows that respondents who have less contact with immigrants prior to our intervention respond more strongly to the treatment. Additional findings suggest that the level of intergroup contact and biased beliefs about immigrants are complementary targets for information campaigns on immigration.

This paper provides novel evidence on the impact of tax decentralization on citizens preferences for redistribution. In a large-scale survey experiment implemented in Spain, an information treatment explains respondents the normative power which regions exercise over personal income taxation. First stage results show that the treatment increases the salience of this feature by 40 percentage points. The treatment increases respondents aversion against inequality, but decreases their support for higher taxes on the rich. Both results are explained by respondents' identities. The effect on inequality is driven by individuals with a stronger regional than national identity, while the rejection of higher taxes on the rich is driven by participants which identify more with the nation than the region. Heterogeneous effects on the trust in the central or regional government confirm this pattern.

We conduct a survey experiment with four thousand German respondents and provide information on two measures of gender inequality, separately or jointly: the gender gap in earnings and the gender gap in pensions. We analyze the effect of providing information on views on the importance of reducing gender inequality and on agreement with the adoption of policies targeted at different stages of the life cycle and aimed at reducing inequality. We find that providing information on both gaps changes perceptions of the importance of reducing gender inequality and of adopting policy measures to this end. Information on only one gap tends to have insignificant effects on preferences for policy adoption. We provide insights into the importance of individual views on female disadvantages in the labor market, personal experiences of inequality, and social norms as correlates of preferences for reducing gender inequality and policy interventions.

This paper examines the historical relationship between teacher shortages, teacher demand, and the business cycle using Norwegian data covering a period of more than 160 years (1861-2023). We find a procyclical pattern in teacher shortages especially for the post-WW2 period. The post-WW2 results imply that doubling the unemployment rate reduces teacher shortage by 0.6-0.8 percentage points. The finding corroborates evidence from other countries that the public sector hires employees with higher skills during recessions than during booms. In addition, teacher demand increases teacher shortages, where the finding is similar in OLS-models, IV-models, and a panel data approach for the pre-WW2 period. The results indicate that a ten percentage points increase in teacher demand significantly raises teacher shortages by about two percentage points in the pre-WW2 period and three percentage points in the post-WW2 period.

This paper evaluates the long-term labour market effects of access to academic upper secondary education by leveraging centrally determined supply changes in Swedish school regions.

Positive impacts on male adult (age 40) wages and earnings were found of increased supply of both Social Science/Humanities (SSH) and Natural Science/Engineering (NNE), but the mechanisms behind the effects differed. Expansion of SSH seems to be partly mediated by opening up access for male students to other programs, as more of the female students got access to SSH. For NNE, the positive impact was found only in cases where the initial supply was highly restricted, meaning that students who were admitted due to expansions were of relatively high academic ability.

Taken together, the findings highlight the multidimensional impact of local educational supply: Expansion of one program affects not only access to that program, but also competition for other programs.

This study finds substantial reductions to criminal activity from the introduction of a

comprehensive high school support program for disadvantaged youth living in the largest public housing project in Toronto. The program, called Pathways to Education, bundles supports such as regular coaching, tutoring, group activities, free public transportation tickets and bursaries for postsecondary education. In this paper, we use a difference-in-differences approach that compares students living in public housing communities where the program was offered to those living in communities where the program was not offered over time. We find that eligibility for Pathways reduces the likelihood of being charged with a crime by 32 percent at its Regent Park location. This effect is driven by a reduction in charges for breaking and entering, theft, mischief, other traffic offenses and Youth Criminal Justice Act offenses.

The difference-in-differences (DID) approach that identifies the capitalization of amenities through changes in housing prices has been widely used in studies of hedonic estimation. Recently, concerns have been raised about how to interpret estimated capitalization effects as changes in welfare (Kuminoff & Pope, 2010, Klaiber & Smith, 2013) We demonstrate two reasons when this divergence between capitalization and welfare changes arises: 1) changes in preferences of the marginal individual, "Tiebout bias" (Goldstein & Paul, 1981, Rubinfield et al. 1987) and 2) when jurisdictions have a large share of the relevant market's population or "market power." (Hoyt (1991), Agrawal et al. (2022). Following Banzhaf (2021), we estimate the capitalization of school redistricting in a DID framework that incorporates general equilibrium effects. When comparing estimates from this DID model to the conventional DID model, we find significant differences in both the estimates of capitalization effects and welfare changes.

Defense spending accounts for a large share of the budget in many countries, but the value of the resulting public good - national defense – has so far escaped assessment. Much of the literature has instead considered indirect benefits of defense spending. In this paper, we assess the direct welfare effects of defense policy, namely an increase in the security of citizens, by means of a survey-based discrete choice experiment. Drawing on a representative sample of the German population, results suggest substantial willingness to pay for an increase in troop numbers, the establishment of a European army and an improved air defense system. The reintroduction of compulsory military service does not enjoy public support. Results further indicate substantial preference heterogeneity across respondents and policy options which we explore. As such, these findings demonstrate how methods of survey-based, non-market valuation can help to refine research in this area of public policy.

This paper investigates how the war in Ukraine has affected the opinions and values of the Russian population. Using data from the Gallup World Poll and the Levada Center, changes in political support for Putin, willingness to migrate, life satisfaction, future optimism, and attitudes towards the West are analyzed. The focus is on the effects of the full-scale invasion in February 2022 and the impact of the military mobilization of young men in September of the same year. We also use data on Russian war victims to examine potential regional differences in Russia.

Are sanctions bypassed by hiding money offshore? Using bilateral data on bank deposits, we compare how offshore deposits from sanctioned versus non-sanctioned countries develop after the US and EU impose financial sanctions. Financial sanctions against individuals increase offshore deposits as (potential) targets attempt to hide their funds. We additionally analyze an example of such sanctions imposed against Russia in 2014 using a synthetic control approach. Offshore deposits originating from Russia increase substantially.

Much like the exploitation of global trade by the first multinationals, early space commerce has the potential to lead to significant conflict as privateers seek to use force to capture resources from others. Governments currently subsidize research increasing such disruptive capabilities despite the fact that international law makes governments -- not firms -- liable for damages. We show that this can be explained in a setting where the potential possibility of conflict affects the terms of an agreement outlawing them. In essence, by increasing the conflict capabilities of one's own firms, this enables a government to push for a more favorable treaty. We demonstrate that under plausible assumptions, this works to the benefit of technologically-advanced nations. Thus, subsidizing current space activities is likely to cement current international income inequality.

We study the shape of the global wealth distribution, using the Forbes List of Billionaires. We develop simple statistics based on ratios of log moments to test the default assumption of a Pareto distribution, which is strongly rejected. Hazard rates show that the log-transformed data instead follow a Gompertz distribution, which means that the data in levels follow a truncated-Weibull distribution. We further apply our model to the U.S. city size distribution and the U.S. firm size distribution. These distributions also show a rejection of Pareto in favor of (truncated-)Weibull. We discuss some theoretical and practical implications of our results.

This paper examines the choice of how aggregate wealth is measured, and how this affects our understanding of its distribution. Using two alternative data sources on the distribution of individual assets – income tax and survey data – we show that whether one targets a National Accounts measure of aggregate wealth, or survey-based aggregates, changes the share of wealth attributed to the top 1% by 1.4 percentage points in 2016-18. We argue that National Accounts – which have become the de facto data source for measuring aggregate wealth – are poorly aligned conceptually with the measure of personal wealth one would often like to target.

This paper studies intragenerational wealth mobility in Germany and Australia using longitudinal household survey data. Our results of rank-rank-correlations around 0.75 over a short period (4-5 years) indicate an elevated persistence of wealth in both countries. In Germany, the rank-rank correlation declines by ca. 7% (to 0.70) when extending the time horizon to 15 years, but there is no decline in the persistence of net wealth for individuals with positive initial wealth. In contrast, we observe a 20-25% decrease (to 0.55-0.60) in the persistence in net wealth in Australia, when the time span under consideration increases from 4 to 16/20 years. Investigating the reasons behind wealth rank changes using OLS regression reveals that income, education, inheritances, savings and portfolio composition are relevant factors for intragenerational wealth mobility.

This study revisits the trends and drivers of wealth inequality and accumulation in the Western world since the onset of industrialization. The empirical analysis reveals that aggregate wealth–income ratios were substantially lower before World War I than previously suggested. It also shows that wealth concentration decreased over the past century, remaining historically low in Europe, while it has increased in the United States. These patterns are primarily driven by the accumulation of housing and pension savings among middle-class households, rather than by reductions in the wealth of the affluent. The findings challenge the notion that unregulated capitalism inevitably leads to extreme wealth accumulation and question the idea that sustained wealth equalization necessitates capital shocks from wars or progressive taxation. Instead, they highlight the importance of institutions that enable ordinary people to build personal wealth in understanding the long-term development of wealth in Western societies.

We provide a new rationalization of why social security may improve welfare. We consider a setting where the introduction of funded social security cannot improve welfare for a fully rational agent. We introduce error-prone individuals who make stochastic savings decisions according to the consistent-mistakes model. The expected utility of error-prone agents is lower than rational decision-makers even if, on average, they save the same. Furthermore, error-prone individuals save less for retirement in a multi-period setting than their rational counterparts. Social security limits the scope of mistakes agents make in their savings decisions and may generate substantial welfare gains.

We investigate the design of optimal transfer policies in developing countries, characterized by substantial inter-regional economic disparities, information asymmetry between central and sub-national governments, and externalities arising from public goods. To address these challenges, we construct a principal-agent model that incorporates asymmetric information between the two tiers of government and considers externalities. Local regions are different in income levels, preference for public goods, or both. We conduct numerical simulations based on the county-level fiscal data of China during 2016-2019. Our finding reveals that the optimal marginal transfer curves under both uni-dimensional and bi-dimensional heterogeneities scenarios are considerably lower than the prevailing one. The optimal transfer undertakes the function of the Pigouvian tax to correct externalities. Moreover, transitioning from the current transfer system to the optimal one yields a substantial welfare improvement, equalling a per capita consumption increase ranging from 3.02% to 4.11%

This paper analyzes the interactions between redistribution and unemployment insurance policies and their implications for the optimal design of tax-benefit systems. In a setting where individuals with different earnings abilities are exposed to unemployment risk on the labor market, I characterize the optimal income tax schedule and the optimal unemployment benefit schedule in terms of empirically estimable sufficient statistics. I provide a Pareto-efficiency condition for tax-benefit systems that implies a tight link between optimal redistribution and optimal unemployment insurance: the steeper the profile of income taxes is, the flatter the profile of unemployment benefits should be, and vice versa. Optimal replacement rates are therefore monotonically decreasing with earnings, from 1 at the bottom of the earnings distribution to 0 at the top, and redistribution through unemployment benefits is efficient. Empirical applications show that these interactions between redistribution and unemployment insurance have important quantitative implications.

This paper analyzes a unique micro-dataset capturing the ownership of about 800,000 properties in Dubai. We use this dataset to document patterns in cross-border real estate investments, a blind spot in the analysis of financial globalization. We obtain four main findings. First, offshore real estate in Dubai is large: at least $146 billion in foreign wealth is invested in the Dubai property market. Second, geographical proximity and historic ties are key determinants of foreign investments in Dubai. Third, a number of conflict-ridden countries and autocracies have large holdings in Dubai. This suggests that the official net foreign asset position of a number of low- income economies is significantly under-estimated. Last, we find that the probability to own offshore real estate rises with wealth, including within the very top of the wealth distribution. About 70% of Dubai properties owned by Norwegian taxpayers were not reported for tax purposes in 2019.

The real estate market has been reported to be particularly vulnerable to money laundering schemes as land and house purchases require large sums of money while being subject to fewer regulatory and reporting requirements. This study aims to shed some light on the empirical link between illicit financial flows and real estate rents using unique city-level data in Europe collected through the web portal Numbeo.com. Given the richness of the data, we use a triple interaction term that declares a supposedly more luxurious dwelling as the treated subset among the all dwellings. In addition, we add a set of conditioning variables that characterise cities that are hypothesised to attract higher volumes of illicit financial inflows. Our measure of illicit financial flows is based on the concept of 'abnormal FDI' by Dellate et al. (2022) which largely reflects the volume of unexplained capital channeled through tax havens.

Residency by Investment programs have become integral to contemporary migration policies, providing a pathway for individuals to acquire a new legal status. In this paper, we study the extent to which golden visas impact and distort housing markets. Using the population of transactions records from 2007 to 2019, we analyse the introduction of the Golden Visa program in Portugal. We first present descriptive bunching evidence around the 500,000€ threshold, revealing potential price distortions. Merging the transaction data to property tax records, we conduct a difference-in-differences analysis assessing the program impact on the discrepancy between transaction prices and fiscal values. This analysis uncovers a “Golden Visa Premium,” where transaction prices exceed fiscal values by an average of around 45,000 euros, indicating more than10% price increase in high-end housing prices. Finally, survey data from the Portuguese population highlights widespread support for ending the program.

Taxable transactions may be misreported to evade taxes and hide illicit wealth. Tax authorities must therefore set policy governing both tax rates and enforcement. We develop a model of optimal taxation and enforcement in which policymakers seek both welfare maximization and “tax accuracy,” wherein taxpayers remit the amount that they statutorally owe under truthful reporting; we characterize the optimal combination of tax rate and enforcement stringency in this setting. We apply this framework to the Mumbai real-estate market, a setting with widespread misreporting and a transparent enforcement instrument: government-specified guidance values act as a minimum required tax base.

This paper examines the effect of asylum seeker intake on the number of new businesses being registered. We combine two datasets: exclusive data on new district-level business registrations and data on asylum seeker intake in about 400 German districts (Kreise) between 2007 and 2021. To address endogeneity in asylum seeker allocation, we use official within-state allocation quotas as an instrument. A one SD higher intake of asylum seekers (≈ 10 asylum seekers) per 1,000 inhabitants leads to 0.7 new businesses per 1,000 inhabitants being registered (≈ 8.8% increase). These new businesses, mainly registered by Germans (not asylum seekers themselves), directly create 2.6 new full-time jobs per 1,000 inhabitants as well as about 8 new full-time jobs per 1,000 inhabitants in the district outside the new businesses. On mechanisms, we also find that the new business registrations are both supply- (new workforce) and demand-driven (new demand patterns).

We present a new methodological approach to measure the redistributive preferences of political parties based on their election proposals. This approach builds on the marginal value of public funds (MVPF) framework. We recover the welfare weight associated with a small reform as the inverse of its MVPF. The aggregated welfare weights of multiple small reform proposals for each party and election year provide measures of the parties’ redistributive preferences along the income distribution. Leveraging this approach, we use a rich structural microsimulation model to estimate the MVPFs and their associated welfare weights for more than 300 proposed reforms of the tax-transfer system by Germany’s five largest parties from 1990 until 2021. Our results allow to study the differences in the redistributive preferences between German parties

and over time.

Does the sudden arrival of a new wave of immigrants distort the electoral performance of local council candidates with an immigrant background? We combine hand-collected candidate-level data on council elections (2001-2021) with detailed administrative data on asylum seekers across Hessian municipalities. We infer candidates’ immigrant background from their names via existing machine learning classification tools. Using a difference-indifferences strategy with a continuous treatment (change in the share of asylum seekers per municipality), we find that candidates with an immigrant background benefit from the arrival of relatively large numbers of asylum seekers such as in late 2015. Further results show that this effect exists exclusively for candidates with a Southern or Eastern European background which are culturally and ethnically relatively similar to native Germans.

What is the causal effect of conflict on refugees’ return and integration? To answer this question, we launched a panel survey of Ukrainian refugees across Europe in June 2022 and combined it with geocoded conflict data. Most refugees plan to return, and initial return intentions strongly predict actual return. Those who initially plan to settle outside Ukraine integrate faster. Increased conflict intensity in the home municipality discourages return there, but not to Ukraine as a whole. It also has no effect on the likelihood of working. Liberation of the home district increases return, while increased pessimism about the outcome of the war reduces return intentions.

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 identify the territories in Africa affected by subnational border reforms during 1992-2013 with GIS methods. Using this data, we first show that border reforms correlate with several local political and geographic variables (e. g., ethnic heterogeneity, conflicts, distance to capital). Secondly, we study the local effects of subnational border reforms. Difference-in-differences regressions at the grid-level with luminosity as outcome variable suggest insignificant effects for most countries. Political implications, as proxied by the incidence of conflicts, are also small and heterogeneous. In contrast, indicators of pub- lic goods provision (education, electrification, health) suggest significantly positive effects in several countries. Overall, border reforms appear to be more consequential for public goods delivery than for local economic development or political stability.

This research aims to examine the impact of the institutional factors and tax revenue on firm performance in 63 provinces and cities in Vietnam. The authors select data of the period 2015-2021 and run the regression model using GMM with the population and public investment in localities as instrument variables. The results show positive effects of Provincial Competitiveness Index (PCI), Provincial Information and Communication Technologies (ICT) Index, labor productivity, and tax revenue on firmperformance, while there is a negative impact of firm investment on performance. There exists a negative interaction effect of PCI and labor productivity on firm performance, which might be due to the lack of policies from the local governmental bodies aiming to enhance the knowledge and skills of the labor force. These results suggest both governmental policymakers and business managers have proper strategies to boost the firm performance in the next period.

We compute government spending efficiency scores via data envelopment analysis. Second, relying on panel data and impulse response approaches, we estimate the effect of decentralization on public sector efficiency and how extreme natural disasters mediate this relationship. The sample covers 36 OECD countries between 2006 and 2019. Our results show that tax revenue decentralization decreases public sector efficiency, while spending decentralization and a regional authority index are positively related to public sector efficiency, both for local projections and panel analysis. For instance, efficiency rises by 10 percent following a spending decentralization shock (reaching over 20 percent after 4 years). Nevertheless, in cases of natural disasters, spending decentralization reduces public sector efficiency. Moreover, extreme natural disasters also deteriorate the negative effect of tax revenue decentralization on public sector efficiency. These results suggest that sub-national discretionary spending and tax revenue responses might be less fruitful when such extreme events occur.

To what extent do economic forecasts for a single country affect expectations at the global level? Designing a large-scale survey experiment among economic experts from over 120 countries, I identify the effect of an information shock about the recession probability in the United States of America on expectations of non-US experts. The results show a large positive effect on the reported recession probability in the host countries of the experts. This has relevant policy implications, as I can show that experts who expect a higher recession probability, are more supportive of increasing global trade integration. This effect is driven by the European Experts, whose host countries have strong trade ties with the United States and potentially seek to diversify those to reduce risk from spillovers.

Are reforms towards individual taxation politically feasible? Are they desirable from a welfare perspective? We develop a novel method to answer such questions and apply it to the US federal income tax since the 1960s. Main findings are: As of today, Pareto-improvements require a move away from joint taxation. Revenue-neutral reforms towards individual taxation are not Pareto-improving, but attract majority-support. Such reforms are rejected by Rawlsian welfare measures and supported by ones with weights that are increasing in the secondary earner’s in-come share. Thus, there is a tension between the welfare of “the poor”and the welfare of “working women.”

Goldin (2014) highlights the role of hours flexibility across occupations as a source of gender wage inequality. We ask how the tax system, in terms of jointness and progressivity, affects occupational choice, work hours and wages across occupations, and the gender wage gap. The decision to work in a high-wage/high-hours occupation depends on the earnings gained from being in that occupation and the cost of having less leisure time. Taxation affects this trade-off in an ambiguous way. Calibrating the model to US data, we find that the impact of (1) introducing individual taxation and (2) removing tax progressivity via a flat tax on occupational choice is relatively small: the share of women working in long-hours occupation increases by at most 0.7pp. By contrast, endogenous wages play an essential role in amplifying the effects of tax reforms due to the positive impact of long work hours on wages.

This paper uses a permanent reduction of the "tampon tax"' in Germany to study the price and unit-sales effects of the tax. Exploiting an extensive data set on the sales and scanner prices of feminine hygiene products in Germany and Italy, our results show that the incidence of tampon taxes is fully on consumers, while demand for these products is price-inelastic. We do not find cross-price effects for a closely related product group, which remained taxed at the standard tax rate. We conclude that reducing taxes on feminine hygiene products could be an effective measure to address "period poverty"'.

While the correlation between working and voting is positive, I provide some of the first evidence that the causal relationship for individuals is negative. Instrumenting for working using EITC expansions and welfare reform, I find that working women are less likely to vote and become more politically conservative. Consistent with these effects, I find decreases in being registered to vote, civic participation, and political knowledge, and increased preferences for conservative government policies. Effects are driven by younger, White, lower-educated mothers, that did not have a working mother growing up, and are consistent across four data sources that span five decades. Overall, working leads to more votes for Republicans and less votes for Democrats. While recent decades have seen more and more women voting Democrat, even more women would have voted Democrat if not for decades of pro-work public policy targeting lower-income mothers.

More innovative multinational enterprises (MNEs) find it easier to shift profits between their subsidiaries located in jurisdictions with different tax rates. While MNEs invest in R\&D and develop IP across multiple jurisdictions, they can strategically move profits arising from that IP from high to low-tax jurisdictions to reduce their overall tax bill. In this paper, we analyze and quantify the importance of two different strategies that MNEs use to move their IP to low-tax jurisdictions: selling a patent developed in a high-tax jurisdiction to a low-tax jurisdiction directly, or signing a cost-sharing arrangement between those two jurisdictions to cover the costs of developing further IP. Combining information on CSAs, patent applications and transactions, and tax payments of US MNEs using US tax returns data and Orbis Global IP data, we provide novel descriptive evidence on the use of both those strategies by MNEs.

The Tax Cuts and Jobs Act unlocked as much as $1.7 trillion of U.S. multinationals' foreign cash. We examine the real and financial response to this liquidity shock and find that firms did not increase capital expenditures, employment, R&D, or M&A, regardless of financial constraints. On the financial side, firms paid out only about one-third of the new liquidity to shareholders, and retained half as cash. This high retention was not associated with poor governance. The high propensity to retain positive liquidity shocks as cash, even among well-governed firms with limited financial constraints, is difficult to reconcile with existing theory.

We use administrative tax data from the IRS to study a tax avoidance strategy that reduces the cost of domestic research and development (R\&D). This strategy relies on cost sharing agreements that allow US multinationals (MNCs) to shift intellectual property to foreign affiliates. An unexpected tax ruling in 2005 created a loophole that allowed US MNCs to generate a tax shield by fully allocating stock compensation of employees to the domestic parent. In contrast to standard cost sharing allocations, this ruling increased the domestic tax deduction associated with R\&D expenses, which lowered the after-tax cost of R\&D. We study the effects of this ruling on market values, use of stock compensation, R\&D investment and relabeling of other costs as R\&D.

In this study, we shed light on the combined effect of corporate income tax incentives and other government policies on multinational corporations’ (MNCs) strategic location of intellectual property. Using granular affiliate-level data for MNC financials and patent ownership locations, we show that stricter employment protection laws and regulatory burdens mitigate the attractiveness of low-tax countries while tax benefits for highly-skilled workers do not affect the attractiveness of low-tax countries in MNCs’ patent location decisions. Additional tests based on the size of MNCs, migrant labor mobility, and variation over time reveal interesting additional subtleties in the interactions between government tax and non-tax policies and patent location choices. Our study contributes to the tax policy debate over cross-border competition for innovative activities by extending the analysis beyond the main effects of corporate income taxes and other government policies on firm’s patent location decisions.

This paper considers Tiebout (1956) competition for mobile firms without restrictions on the set of tax policy instruments. Communities set taxes and provide public input goods in order to attract heterogeneous firms. In equilibrium, there is sorting of firms into communities that specialize on a certain firm type. The efficiency properties of the equilibrium allocation crucially depend on the observability of the variable that drives the congestion externality. With observable congestion drivers, the resulting equilibrium is efficient and the first-best allocation is attained through decentralized decision-making. With unobservable congestion drivers, communities use distortive input taxes in equilibrium. Nevertheless, the fiscal externality is zero. In contrast to the standard tax competition model, capital taxes are too high, but tax coordination on input taxes alone fails to achieve a welfare improvement. The model rationalizes the use of distortive source-based taxes in tax competition and questions the welfare enhancing potential of tax coordination.

Self-determination is a main rationale for fiscal decentralization, but seldomly analyzed in model of local public finance. This paper studies the equilibrium effects of local fiscal autonomy, accounting for preferences of self-determination. We propose a quantifiable structural equilibrium model where heterogeneous households sort across municipalities in response to progressive income taxation and public good provision. We calibrate the model to municipalities in the Canton of Bern in Switzerland using rich household-level and municipal data. In particular, we exploit quasi-experimental policy variation in voting rights to quantify benefits from self-determination and employ machine learning methods to represent the local political process. We find that restricting local fiscal autonomy decreases welfare by 1% for (almost) all households.

To study the distribution of economic activity across space and the effects of place-based policies, I develop a model of the location choice of new establishments incorporating taxes, monopsonistic labor markets, and spillovers. Estimates using administrative data from Germany indicate that establishments generally have a preference for lower taxes, as well a preference for lower worker outside options which enable establishments to pay lower wages. The degree to which various types of productivity spillovers matter in the location decision of establishments varies greatly between industrial sectors. I also quantify the effects of a counterfactual place-based policy and find that commuting zones display highly heterogeneous wage and economic activity responses to the same policy due to differing degrees of labor market power across space.

This study reveals how an interaction between tax competition and the political overrepresentation of the rich can collectively impede redistribution in response to rising inequality. We develop a model of capital tax competition between countries, each comprising two classes: the rich and the poor. Income bias in political attention creates the overrepresentation of the rich in each country. First, we show that tax competition diminishes the political attention level of the poor, amplifying the rich's political influence. Hence, tax competition reduces capital taxation not only through conventional economic channels but also by altering the political power in favor of the rich. Remarkably, from a global perspective, the attention level of the poor is under-provided for their own benefit. Second, rising inequality should increase the poor’s political attention level, inducing higher taxation. However, increasing inequality is more likely to reduce taxation under tax competition compared to a closed economy.

This study provides a detailed descriptive analysis of income inequality within the European Union (EU) over the last three decades, a period covering its expansion to include 13 new member states, mostly transition economies. We examine income inequality at three levels: between countries, within countries, and EU as if it were an entity. Despite GDP convergence among member states, we find increased within-country inequality, particularly in newly acceded members, contrasting with modest rises in established EU countries. Although initial inequality levels were lower in the newer EU countries, they have escalated to match or exceed those in the older member states. We also uncover disproportional income growth pattern across the combined EU income distribution, with lower-middle-income brackets seeing significant gains, though the highest increases are found among the top earners.

This study explores the potential of personal income tax (PIT) to address inequality in African countries. We employ new data on PIT design and reforms from the TaxDev Employment Income Taxes Dataset (EITD) alongside data on pre-tax income distributions from the World Inequality Database (WID) to model the redistributive capacity of PIT regimes in Africa and the extent to which reforms between 1995 and 2020 have affected this capacity. We find that, on average across the sample period, PIT could reduce inequality by around 4.1 Gini points if applied to the entire income distribution. Focusing specifically on policy design, cross-country regressions show that the level of the top marginal PIT rate, and the point at which it is applied, matter most for its potential effects on inequality. Crucially, we find that PIT reforms over the period in question have, on average, lessened the redistributive capacity of PIT.

This paper presents the first systematic attempt to create cross-country comparable measures of spatial wage disparities between and within similarly-defined local labour market areas (LLMAs) for Canada, France, (West) Germany, the UK, and the US since the 1970s and assesses their contribution to national inequality. By the end of the 2010s, spatial inequalities in LLMA mean wages are similar in Canada, France, Germany and the UK; the US exhibits the highest degree of spatial inequality. Over the study period, spatial inequalities have nearly doubled in all countries, except for France where spatial inequalities have fallen back to 1970s levels. Due to a concomitant increase in within-place inequality, the contribution of places in explaining national wage inequality has remained fairly constant over the 40-year study period, except in the UK where we document a significant increase.

This paper expands the traditional concept of disposable income by including in-kind benefits for education and health and consumption taxes into the analysis. This extended view on tax-benefit systems offers a more comprehensive understanding of redistribution mechanisms within countries and facilitates cross-country comparisons. In a first step, our analysis identifies households as either net contributors or net beneficiaries. Our results reveal significant variability in net fiscal contributions across households, influenced by factors such as income level, household composition, and age. We find that extending the income concept reduces the number of net contributor households. In a second step, we take a life-cycle perspective, estimating the contribution of each age cohort in each EU Member State. Our results highlight that individuals contribute very differently over the life cycle across the Member States, and that these contributions are highly correlated with the retirement decisions of individuals.

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 study highlights the overarching role of risk shifting via alternative risk transfers (ART) in multinational companies' profit shifting practices. Risk shifting allows multinational companies to transition from ex-ante to ex-post shifting, that is, it reduces the risk of shifting profits away from a loss-making affiliate. Therefore, ART enable the multinationals to be more aggressive in their profit shifting. Our analyses also rationalizes the dominant use of sale-dependent royalty payments to invoice user fees on intangible assets. Such royalties are superior to fixed fees whenever the scope of ART is constrained and risk shifting is incomplete. The reason is that the amount of shifted profits is positively correlated with profitability when sales-dependent royalties are used.

We model capital investment in an oligopoly as an infinite-horizon dynamic game and analyze the short-run and long-run economic effects of a country’s corporate tax policy. In an industry with a low rate of capital depreciation (or product turnover), an increase in the tax deductibility of a firm’s capital investments, as reflected in a shift from income taxation to cash flow taxation, decreases market concentration and increases consumer surplus at the cost of large tax subsidies. However, in industries with a high rate of depreciation, the shift increases consumer surplus and tax revenues at the cost of higher market concentration.

An increasingly important component of corporate social responsibility is corporate tax responsibility, i.e., the extent to which a company pays its fair share of taxes. We develop a model of a company where the shareholders may care about corporate tax responsibility, but the CEO does not. We show that when shareholders care about corporate tax responsibility, they condition the CEO's compensation on both after-tax and before-tax profits. However, and surprisingly, we find that such a compensation contract may also be optimal for purely selfish shareholders. The reason is that, under quite natural conditions, a mix of before- and after-tax profit incentives gives stronger incentives to invest and exert effort than relying on after-tax profits only. Tax avoidance decline when before-tax profits play a more prominent role in the incentive contract, and more generally, the price for the additional managerial effort is a higher tax burden in the firm.

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.

I use new survey data from France to explore attitudes towards the inheritance tax and demand for redistribution. Although the inheritance tax is very unpopular, respondents show significant support for redistributive taxation, namely for taxing capital income, and the bequests of parents who have themselves inherited. This suggests that respondents do demand redistribution, but that they do not see the inheritance tax as an effective redistributive tool. I analyze how these preferences shift when exposed to two arguments: one highlighting wealth inequality, the other defending parents' right to bequeath their patiently-earned savings. The inequality argument increases support for the inheritance and capital income taxes. Surprisingly, the second argument also increases support for the capital income tax, and mildly increases support for the inheritance tax. This last finding may be due to backfiring, or to that argument increasing support for taxing "low effort" income and wealth.

In recent decades, macroeconomic developments such as globalization, skill-biased technological change, and automation have increased the wedge in the valuation of different skills in the labor market, with certain skills becoming less valuable while other skills receive even higher rewards. Do people perceive such skill-biased inequalities as fair? We provide causal experimental evidence of people's fairness views when income inequality between workers with different skills is driven by exogenous market forces. Our paper suggests that the conventional dichotomy of effort versus luck falls short of explaining redistributive preferences in contexts where markets generate and perpetuate inequality.

We conduct a large-scale online survey in Germany to study beliefs about wealth inequality and preferences for wealth redistribution. First, we examine participants' knowledge of the German wealth distribution and their position in it. Second, we investigate the impact of an information experiment on redistribution preferences. One group receives information on the wealth distribution's shape, while another learns their position in it. We find no significant average treatment effects in the full sample. However, those overestimating their position reduce their inequality aversion after learning their position, while those underestimating it are more likely to believe anyone can become successful through hard work. We employ a data-driven approach to investigate heterogeneity in treatment effects and present evidence that younger participants decrease their support for redistribution after learning about the shape of the wealth distribution. In contrast, older participants decrease their support after learning their position in the distribution.

Employing data from the 61st and 68th National Sample Survey data rounds, our analysis uncovers socio-economic determinants of the spousal age gap (SAG) in India, demonstrating an "inverted U-shape" pattern. We identify that employment in similar white-collar professions is associated with smaller SAGs. In rural settings, transitional household dynamics contribute to reduced age disparities, underscoring the influence of family structure. Furthermore, the limited availability of white-collar jobs regionally exacerbates SAGs, indicating occupational stigma's impact. The expansion of urban white-collar employment in 2004-05 initially narrowed SAGs, though this effect diminished by 2011-12. Additional factors such as household income and demographic pressures are also significant. Our findings suggest that the abandonment of arranged marriages, combined with socio-economic progress, educational gender equity, partnership economics, and shared normative standards, could serve as catalysts for reducing or inverting SAGs, offering new perspectives on age hypergamy in India.

The mentally-ill are at higher risk of needing to use income-support programs. However, psychological evidence suggests poor mental health increases the incidence of administrative burdens, raising concern about whether social assistance programs screen the mentally-ill efficiently. So far, the welfare consequences of such an inefficiency have been undocumented. I use administrative data from the Netherlands and show that eligible people with poor mental health receive social assistance around the same amount as the healthy. My theoretical framework shows that this correlation test is insufficient for characterizing welfare when take-up is driven by need vs ordeal-incidence: both could depend on mental health. I derive sufficient-statistics formulas for marginal welfare effects of changes in the costs and benefits of take-up separately. Administrative burden disproportionately screens out people with poor mental health, but the mentally-ill also value benefits more. These empirical estimates suggests reducing ordeals is about three times better than increasing benefits.

This study provides causal evidence that cash-transfer programs have potential to alleviate the income-health trap in advanced countries. We utilize variation provided by the Finnish basic income experiment which increased the average income of 2,000 randomly selected unemployed by 8–10% during the years 2017–2018. Our estimates imply that the experiment reduced both the use and the costs of psychotropic drugs by 8–11%. While these effects are stronger for less severe mental disorders, the results also suggest a reduction in mental health related specialized care.

This study examines the causal impact of expanding the elderly welfare expenditure in South Korea on the elderly suicide rate, utilizing changes in the Basic Pension system as an instrumental variable. We find that an increase in welfare expenditure significantly lowers suicide rate among those 65+, especially in men over 80. Lastly, our analysis of elderly households’ income and consumption indicates that while total income remained stable, consumption rose following enhanced public income transfers. This implies that stronger public income transfer programs reduce income uncertainty, boost consumption and leisure, and consequently lower the suicide rate.

We examine the health effects of a labor market activation policy, the Youth Job Guarantee, implemented in Sweden in 2007. To estimate the causal effects of this policy on health, we implement an RD-design using the age-eligibility threshold of the policy, together with detailed administrative data on health outcomes including measures of mental health. Health effects could arise indirectly via effects on employment, or directly, e.g., via an improved daily routine. In contrast to most of the existing literature on the health effects of ALMPs, our results indicate that the activation policy did not have clear positive effects on health one year after the start of the unemployment spell, measured by prescribed medication or healthcare visits.

Many Western economies have seen a fall in the employment share of the traditionally male-dominated, manufacturing sector, while demand is increasing in female-dominated jobs. Still, men appear reluctant to enter these occupations. To understand persistent labor market segregation, I exploit within-school-across-cohort variation in the gender composition of the occupations of schoolmates' parents, and document that gender segregation is transmitted from one generation to the next. Boys who were exposed to gender-stereotypical male role models enter male-dominated occupations, while those socialized in cohorts with peers whose fathers worked alongside women enter occupations with more women. This effect goes beyond the influence of their father. In general, mothers' labor market behavior has negligible effects on boys. In contrast, girls are mainly influenced by female role models, and compared to boys the effects are much smaller. However, when a larger share of mothers work full-time, gender segregation decreases in the next generation.

One potential factor that contributes to the gender earnings gap is the joint taxation of spouses. However, quantifying the impact of joint taxation on earnings has been challenging due to the lack of exogenous variation and the simultaneous influence of traditional gender norms. To address these challenges, we exploit the introduction of joint taxation for same-sex couples in Germany in 2013. This allows us to analyze the entire population of same-sex couples who file taxes jointly using newly linked administrative income tax return data. To determine the effects of joint taxation, we employ a difference-in-differences approach using different-sex couples as the control group. Our findings reveal that same-sex secondary earners experience a significant decrease in earnings after filing taxes jointly, leading to a substantial widening of the partner pay gap. Primary earners also reduce their earnings, although not as substantial, suggesting that the income effect is stronger than the substitution effect for them.

The taxation of couples is a recurring theme in academic debate. In this paper, we explore whether political economy arguments can explain the persistence of joint taxation in Germany. We contrast two different methodologies to answer this question. First, we estimate recently developed sufficient statistics to determine the share of winners and losers from a reform towards individual taxation based on observed behavior, i.e., revealed preferences. Second, we ran a large scale survey experiment to elicit stated preferences and attitudes regarding the taxation of couples among a representative sample of the German population. Both methods consistently show that the tax treatment of couples in Germany is highly controversial. Relying on revealed preferences, the support for a reform towards individual taxation barely passes the majority threshold. According to stated preferences, support for such an elimination of income splitting is even lower, but varies strongly across household types and political party preferences.

Despite female advances in the labor market, it remains a quasi-universal norm that men spend more time on paid work, while women spend more time on housework and child-care. In this paper, we study the importance of the male breadwinner norm by recurring to a large administrative dataset for Germany. Specifically, we analyze whether a discontinuity at the point of equal incomes exists which is interpreted as couples’ avoidance of violating the male breadwinner norm. We stratify the sample in several ways to gain insights into the channels driving the discontinuity. Furthermore, we focus on the role of tax incentives’ on the intra-couple income distribution.

We build a model in which home owners decide when to switch to carbon-neutral heating and investments in energy efficiency. Agents differ with regard to abatement costs, home ownership, labor productivity and time they are alive. The investment model is nested in an overlapping generations Mirrlesian optimal taxation model. We develop a compensation mechanism which guarantees a Pareto-improvement consisting of five key components: (1) carbon pricing, (2) a category-based transfer based on building characteristics exactly compensating carbon prices, (3) uniform ad-valorem subsidies on investments and operational costs associated with decarbonizing a building, (4) public debt to finance the ad-valorem subsidies and (5) income tax adjustments based on climate mitigation benefits to service debt. We show that exact compensation only depends on the interest rate, fossil fuel price path and ambition of climate policy.

The uptick in energy prices has sparked concerns about the equity of the distribution of energy expenditures across households.

We employ data from the European Household Budget Survey for 19 European countries and the years 2010, 2015, and 2020 to gauge the level of inequality through concentration indices of energy expenditures and Kakwani indices. In 2020, the proportion of equivalent disposable income allocated to energy expenses for the lowest income quintile ranges from 7.5% in Luxembourg to 30.1% in Croatia. All countries analysed exhibit regressive energy expenditures.

Significant variations exist in the degree of regressivity. Luxembourg stands out with the highest regressivity at -0.26, while Bulgaria features the least regressivity with a value of -0.07. We also analyze the distinct impact of various socio-demographic factors on energy expenditure inequality. Taking Germany as an example, our findings reveal that the household type, accounts for nearly 63% of the concentration index.

The factors determining the allocation of renewable energy facilities and their effects are questions of growing interest. Using data on all wind farms and solar farms installed in Spain and electoral results at the municipal level from 1991 to 2019, we conduct a diffin-diff event-study to determine the effect of siting these facilities on different electoral outcomes. Our findings reveal that siting a wind farm results in an electoral loss of 2.2 percentage points for the party incumbent at the regional level, while the local incumbent faces no significant punishment. However, when we perform heterogeneity estimation based on political alignment, the electoral loss increases to 4.8% for the party holding office at the regional level on those municipalities in which both layers of government are aligned, while the local incumbent in aligned municipalities experience a 2.2% loss of their vote-share.

In this paper, we consider the income distribution of Japanese high-income earners using micro tax data provided by National Tax Agency for the first time in Japan.

While wage income is the most important income for most of high-income earners, stock capital gains are the most important income for the very top high-income earners. Pareto coefficient of total income in Japan is about 1.45 in 2020. This is much lower than the previous estimates of Pareto coefficients 2.1 in 2003. Different from the existing studies based on data without capital gains, our lower Pareto coefficient estimate shows income concentration toward the super-rich in Japan. The tax burden rate increases with income until about 100 million Japanese yen but decreases beyond it. This regressivity occurs since Japanese income tax system imposes lower tax on capital income. To restore income redistribution function, capital income tax rate should be raised in Japan.

This paper examines income inequality and dynamics in France, using exhaustive administrative panel data. We find that the market income distribution is highly unequal, with the top 1% receiving around 6% of the income. Income mobility is characterized by strong persistence at all income levels and for all age groups. Using a non-parametric framework that accounts for differences in income risk along the market income distribution, we reveal significant differences in income growth moments. Our findings indicate that the distribution of growth rates has high variance, excess skewness, and fat tails. We also investigate the role of redistribution as an insurance tool against income risk and find that transfers are particularly pivotal in reducing income risk for the lower part of the income distribution. We show substantial heterogeneity in income risk across locations, education and occupation groups, and the share of capital in total income.

In recent years, the use of both individual tax data and national accounts data to study United States income inequality has been controversial, and one important piece of this controversy is the role of corporate income and the corporate sector. We provide a framework for thinking about the historical and conceptual relationship between income, inequality, and the corporate sector. We make several contributions. First, we assemble a variety of previously unused data to study the corporate sector in the long run. Second, we survey important long-run sectoral and legal changes to the allocation of income between the individual and corporate sector and the study of inequality. Third, we show that inequality measures are sensitive to how corporate income is imputed to individuals, and that the primary methods used in existing literature may understate top income shares before 1986.

This paper presents distributional national accounts for Honduras over 2003- 2019, using survey microdata, administrative tax records, and national account aggregates. It assembles comprehensive data on formal income for high-income individuals, including information on corporate shareholders, which allows cor- porate profits to be assigned to their owners. The estimates suggest a high and persistent inequality in the country: the top 1 percent highest earners received approximately 30 percent of the total income over the period, placing Honduras among the most unequal countries in the world. Undistributed corporate profits are the overwhelming income source at the very top of the distribution, highlight- ing its importance in the measurement of income inequality. Finally, using a panel of tax records, the paper also documents that not only is inequality persistent, but the same individuals are often observed at the top, suggesting that the observed inequality has deep roots.

A growing literature in public and corporate finance emphasizes the role of intertemporal tax arbitrage for investment and firm activity, and several papers have documented salient anticipatory payout responses to pre-announced tax changes that were implemented as planned. We study an unusual event in the history of Swedish tax policy. An increase in the dividend tax on shares of closely held corporations, scheduled for January 1, 2018, was canceled at short notice. We examine how shareholders and firms reacted to the discontinued reform. Dividends accelerated in 2016 and 2017, but the impact of these financial operations on firm investment is unclear.

This paper uses administrative data to analyze the incidence effects of an employer-administered EITC program in Italy. In a setting that allows to disentangle the wage from the employment effects of EITCs, I find no effect on gross wages at the market level. I explore the role of firm-level mechanisms as determinants of tax incidence. The reform creates more or less exposed firms as a share of their pre-reform eligible workers. Earnings of eligible workers in more exposed firms decrease compared to comparable less exposed firms. Highly exposed firms capture up to 30% of the transfer. The effect is monotonic in the share of eligible workers. Both higher rent-seeking incentives or higher salience can explain the results. The results show significant heterogeneity in the incidence of tax credits across firms and highlight that firm-level channels in the transmission of incidence of wage subsidies are likely to be significant.

We investigate how income should be redistributed in economies where taxpayers supply multiple production factors which may be imperfect substitutes. The production sector may exhibit market imperfections and be specifically impacted by some "production policies" including the taxation of intermediate goods (e.g. taxing robots), public production, trade openness and competition policies.Deviation from production efficiency depends on whether or not the tax system can be reformed in some specific directions, that we label "GE-replicating", which replicate the effects on taxpayers' supplies and utility of factor price adjustments. If reforms in the GE-replicating directions are admissible, production policies should be designed solely to enhance production possibilities. Moreover, tax formula incidence and optimal tax formula are only modified to correct for market imperfections. We illustrate these insights with practical examples, including intermediary goods taxation, Cournot duopoly scenarios, changes in trade regulations, and taxing robots.

This paper investigates the extent of cryptocurrency investment in Norway. First, we use Norwegian tax records to investigate the cryptocurrency portfolios reported for tax purposes. All Norwegian taxpayers are obliged to report the market value of their cryptocurrency at year-end. The tax records reveal that almost 1 percent of Norwegian taxpayers declare owning cryptocurrencies. We show that, although distinctly younger, cryptocurrency owners are similar to owners of other kinds of assets in terms of wealth. Nonetheless, as cryptocurrencies are self-reported, the figures observed in tax returns are likely under-reported. In the second part of the paper, we attempt to account for this by merging tax record abstracts of all Norwegian taxpayers in 2021 with the list of depositors on the cryptocurrency platform Celsius as of April 2022. Less than half of the Norwegian taxpayers with a Celsius account reported any cryptocurrency wealth to the tax administration three months prior.

Here we introduce the largest and most detailed dataset to date of long-term change in the global IFF regulatory landscape—the Regulation of Illicit Financial Flows (RIFF) dataset. Compiled with support from the UK FCDO GI-ACE program, and assistance from the FSI team at the Tax Justice Network, the RIFF provides annual data on 22 regulatory indicators, in 61 key jurisdictions, for 1990-2020. Analyzing this new world map of long-term IFF regulatory change, we find evidence of broad international regulatory convergence, across offshore jurisdictions and OECD countries, in AML/CFT compliance and international information exchange. However, these areas of convergence are layered on top of a persistent offshore-onshore divide in statutory banking secrecy, and the scope and accessibility of beneficial ownership data, wherein lapses also persist in key OECD members. This is likely to have a particular impact on the investigative efforts of non-governmental actors, including journalists and civil society organizations.

Cryptocurrencies pose a new threat to tax enforcement. Their anonymous nature leaves tax authorities with few enforcement tools. In this paper, we provide the first direct evidence of cryptocurrency owner characteristics by matching transaction data from cryptocurrency platforms with tax records. We find a tax non-compliance of 93% and behavioral effects of increased tax enforcement.

We present direct evidence that firms serve as tax-free consumption vehicles. Drawing on a unique combination of data from an electronic invoicing program in Portugal (“e-Fatura”) we show that individuals who control firms shift 36% of their monthly personal expenditures to firms and 31% of their household expenditures. The effects are driven by owner-managers of small closely-held firms through expenditure categories that lie on the border between business and final consumption, but spread among business managers all over the income distribution. Our results suggest that government revenue losses due to consumption through the firm amount to 1% of the GDP. Reallocating tax savings and personal expenditures hidden within firms to reported household income of business managers increases the Gini by one percentage point, and the top 1% income share by half percentage point.

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.

This paper extends the Mirrleesian non-linear income taxation model, of the modern form as expressed by Diamond (1997) and Saez (2001), to the case where people also care about their ordinal income rank in society. It is concluded that preferences for rank induce externalities that tend to increase the optimal marginal tax rate, and that these effects may be substantial. This is despite the fact that the ordinal income rank is unaffected in the model for all individuals who work, implying that the modified taxes due to rank positionality are not due to governmental incentives to change the ordinal rank. While this is the first Mirrleesian model with concerns for rank, the results are in contrast to some related earlier results.

We establish foundational results in dynamic consumption taxation. Network goods such as cellphones are an increasingly important part of the economy and require a different fiscal approach than non-network goods. Their consumption profile is dynamic, an aspect under-studied by the existing literature. Due to network effects, market growth today can increase willingness-to-pay tomorrow. This intertemporal externality changes the optimal tax rate through time. Optimality may require subsidization in early periods when demand is low followed by high subsequent taxes. These results also generalize to a wider class of goods with subtle network effects, including indoor dining during a pandemic.

This paper develops a comprehensive framework for analyzing the revenue, efficiency and social welfare implications of taxing top incomes. It generalizes the Saez (2001) formula for the optimal top tax rate by deriving analytical expressions for the Laffer curve and the excess burden. Applied to the 2021 U.S. top federal tax bracket, assuming a taxable income elasticity of 0.25, the study finds an excess burden of $101 billion and a maximum potential revenue increase of $111 billion. In contrast, other English-speaking countries and Germany are positioned closer to their Laffer curve peaks, whereas the Nordic countries studied are on the downward-sloping part of the Laffer curve. Additionally, the paper endogenizes the marginal social welfare weight on high-income earners and, following an inverse optimal taxation approach, concludes that in none of the studied countries does the observed top marginal tax rate appear consistent with a conventional welfarist social welfare function.

Measuring the welfare consequences of tax change is critical for policy evaluation. Tax schemes are progressive and piecewise functions, and agents decide on different occupations with different evasion facilities. This paper studies the measure of welfare effects of tax change incorporating those elements. We model an economy with those elements, where self-employed bunch at the income bracket threshold and declare less income to face a smaller marginal tax rate than they owe. Later, we characterize the welfare effect of tax change. This characterization depends on evasion, occupational decisions, and frictions based on the tax system. Those elements produce a divergence with the use of the elasticity of taxable income or total earned income. Also, we propose a metric to estimate the marginal change in welfare based on a trapezoid. Lastly, we estimate the measure using a tax reform in Chile, showing the relevance of incorporating occupational decisions and tax evasion.

This paper uses administrative data from all registered Thai firms to investigate the unintended consequences of size-dependent regulations in SME promotion policies. Focusing on Thailand’s 2011 introduction of a revenue cap for the SME tax incentive program, which mandates that firms must never exceed this threshold, we capitalize on this exogenous policy shift to assess its effects on firm’s growth. Our study shows a marked bunching of firms just below the cap. A difference-in-differences analysis indicates that, following the cap introduction, eligible firms under the threshold exhibit a significant decline in revenue growth compared to those just above it. This adverse effect is more pronounced among firms with lower pre-policy profitability. We further document substantial negative effects on investment and profitability. Our findings highlight the paradox within size-based SME policies: while intended to help smaller businesses, the measures might inadvertently suppress growth and deter investment.

This paper shows that bargaining over tax payments is an important feature of tax compliance and enforcement in lower income countries. Analyzing the universe of administrative tax filings from Zambia, we document sharp bunching in (i) dominated regions above tax schedule discontinuities and (ii) at round number tax payments (not necessarily round turnover). Additional evidence from our own survey suggests that discussing tax payments with tax officials before filing taxes is widespread, consistent with tax payments being the outcomes of bargaining. Such bargaining over taxes is consistent with fact (ii), as bargaining outcomes are often round numbers, and with fact (i), because tax schedule discontinuities restrict the set of feasible bargaining outcomes. In contrast, alternative cannot rationalize the bunching patterns and are inconsistent with additional experimental survey evidence. Finally, we generalize the conventional Allingham Sandmo (1972) model and show that bargaining leads to pareto-improvements if state capacity is sufficiently low.

Promoting growth of small firms is an important policy concern. However, size-based policies can incentivize firms to remain below a threshold. Using the context of an Indian revenue-based tax registration threshold that affected only manufacturing firms but not services firms, coupled with administrative tax data, we examine how firm growth responds to the threshold. We find that firms respond by slowing down growth in reported revenue from far below the threshold. Our difference-in-difference estimates suggest this slowdown to be around 14 percentage points or roughly 42% of average growth. A lack of corresponding change in reported costs, along with heterogeneity analysis suggests an evasion response rather than a real response by firms. We modify the standard Allingham-Sandmo model of evasion to calculate deadweight loss due to a threshold in a dynamic setting and find that the welfare cost of a threshold can be substantial in the long run.

Turnover is a key indicator of economic activity, but we know little about how much entrepreneurs adjust it as a response to taxation. This paper exploits the notch created by the eligibility cut-off of the preferential turnover tax regime for solo self-employed in Italy to study turnover responses to taxation. I find substantial and significant bunching below the turnover threshold of the regime. Professionals, business intermediaries and retailers have the largest observed responses. I estimate the turnover tax elasticity in these three sectors by focusing on the marginal buncher. To do so, I build on Kleven and Waseem (2013) to develop a theoretical framework that fits the institutional set-up and rationalises the observed responses to it. Professionals have the largest turnover elasticity (0.066). Difference in compliance costs across regimes explains less than half of the observed responses, therefore highlighting the key role of low taxation for the observed bunching behaviour.

We construct a new linked survey-administrative dataset for Italy to show the relevance of heterogeneity among the self-employed for income evasion. We find that liberal professionals, sport and art performers underreport to tax authorities about 50% of their true income, which is almost three times the size of income underreporting detected on average for entrepreneurs. We also find that low-educated entrepreneurs evade more income than high-educated ones and provide explanation for this result. Then, we study the implications of evasion on income dis-tribution and earning differentials. We find that households at the 10th income decile generate about 80% of tax revenue losses due to self-employment income underreporting. We also show that the self-employment earning puzzle is reversed after accounting for evasion, with income gains of about 40% relative to salaried workers with differences across working status and edu-cational level.

We present empirical evidence on the cost of tax sheltering among high-income taxpayers within progressive income tax systems. Exploring a unique personal income tax policy change in Australia, we use the “bunching” around the top tax kink to estimate the costs of tax sheltering and the Elasticity of Taxable Income (ETI). Our findings reveal substantial behavioural responses to tax changes among high-income taxpayers, particularly those with greater flexibility in income adjustment, suggesting that tax-sheltering behaviours play a pivotal role in their responses. When accounting for these costs, the estimated ETI significantly increases, emphasising the necessity of considering tax sheltering in tax policy analysis. We contribute to the ongoing discourse on optimal tax policy design and its impact on economic behaviour. Our findings have important implications for policy debates on whether high-income individuals should be taxed at higher rates.

We examine the use of paid tax preparers by individual taxpayers in the US between 2011 and 2019. We provide novel descriptive evidence characterizing the paid tax preparers and the users of their services. We show that over 55% of individuals use paid tax prepares and taxpayers who use paid tax preparers earn more than non-users, but claim significantly more credits at the same time. The average size of the tax preparer clientele varies with average income of clients and declines for clients with highest incomes, suggesting small specialized tax preparer networks for the richest clients. Second, we quantify the tax savings that paid preparers are able to offer their clients using a two-way fixed effect switchers model (AKM). Preliminary evidence suggests that while individual fixed effects determine the overwhelming majority of variation in effective income tax rates (ETRs), variation in paid preparer skill explains 10% of ETR inequality.

This paper documents the impact of third-party enforcers on behavioral tax responses. Using administrative data from the wealthiest state in Brazil, we analyze the effect of a tax reform that designated notary officers as enforcers of gift tax liability. Our findings indicate a 3.8(1.3)-fold increase in the number (total sum) of reported gifts per semester, positively impacting tax liabilities. The reform led to smaller individual gifts, with the elasticity of taxable gifts close to 0.01, which is significant after the reform. These results suggest that the delegation policies, such as pre-auditing schemes, promote tax compliance in developing countries.

The Poor Law Amendment Act of 1834 drastically reduced welfare spending across England and Wales. Using a difference-in-differences approach, we find that the withdrawal of poor relief had a lasting effect. Boys and girls exposed to reductions in welfare spending as children are more likely to hold low-skilled occupations as adults, and grandchildren of those exposed are less likely to attend school. The results illustrate the ways in which social policy can affect future generations.

This paper presents novel evidence about the effects of a permanent, large-scale, and government-implemented cash transfer program, the Uruguayan PANES/AFAM-PE. I focus on three critical dimensions of individuals' transition to adulthood: education, fertility, and labor market decisions. I use a unique combination of individual-level administrative records that exhaustively describes the year-by-year trajectory of the effects. Using a Regression Discontinuity Design that exploits the use of a poverty score to define eligibility to participate in the program, I show that the program reduces women's teenage pregnancies by 9.4p.p., increases participants' early adulthood labor market participation by 6.4p.p., months worked by 4.4, and earnings by about 12\%. The evidence on education outcomes is mixed but suggests a stronger attachment to the secondary education system. Consistent with a postponement of women's first birth being the main driver, changes in labor market outcomes are observed exclusively for women.

Despite being the only federally protected form of leave in the United States, relatively little is known about how being eligible for Family and Medical Leave Act (FMLA) protections affects women’s post-birth labor market outcomes. This project uses administrative data on births (Census Household Composition Key) and quarterly earnings (LEHD-EHF and JHF) to compare post-birth employment and earnings outcomes for working women who give birth after 12 months in their jobs (and are eligible for FMLA leave) to those who give birth too soon in their jobs to qualify for FMLA leave. Eligibility for FMLA leave increases the probability women are employed the quarter after they give birth by 6.0%, and the probability they are employed six years later by 4.6%. FMLA eligibility also increases women's earnings both in the short- and long-term, such that eligible women earn over $10,000 more over the first six years after giving birth.

I use the implementation and sunset of “Man in the House” rules within state welfare programs to estimate the long-term impacts of families’ access to economic resources through traditional welfare programs. “Man in the House (MITH)” rules limited families’ participation in the welfare program on an extensive margin if welfare staff suspected non-marital relationships among program participants. I find that states’ enforcement of MITH rules led to racially disparate declines in families’ participation in AFDC. The invalidation of MITH rules by the U.S. Supreme Court in 1968 led to a 15 percent increase in Non-White families’ participation in AFDC. I find high school completion declined among Black cohorts graduating after MITH rules contracted access to AFDC. Conversely, educational attainment increased among Black cohorts exposed to the invalidation of MITH. These results offer new evidence of the consequences of historical U.S. welfare policies that disparately impact families’ access to public assistance.

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.

The U.S. federal debt-to-GDP ratio has doubled since the Great Recession, highlighting the importance of understanding the relationship between this debt and long term interest rates. Previous work finds empirically that a one percentage point increase in debt leads to a two-and-a-half basis point increase in interest rates. This paper revisits these estimates and finds they are particularly sensitive to the assumption for ongoing fiscal policy leading to a potentially even smaller relationship. Further, the relationship may vary with different types of debt financed fiscal policy so we estimate if the elasticity varies with respect to three dimensions (i) whether the change in debt is due to a legislative or macroeconomic shock, (ii) whether the change in debt is due to a change in discretionary outlays, mandatory outlays, or revenues, and (iii) how much wealth inequality exists in the economy. Overall, the results point to a fairly small elasticity.

We analyze public debt policies within a calibrated stochastic OLG model with distortionary taxation. The risk-free interest rate is realistically sensitive to public debt and lower than the growth rate. The risky rate is substantially higher due to convenience benefits of public debt, idiosyncratic return risk, and aggregate risk. To discern fiscal and welfare perspective, we define and compare deficit-maximizing debt (DMD) and welfare-maximizing debt (WMD). Although free-lunch deficits can reduce tax distortions, DMD tends to exceed WMD. Both rise if the risk-free rate falls due to increases in risk or convenience benefits, but not necessarily if it falls due to lower growth or government spending. Taking market power into account barely changes DMD yet substantially reduces WMD. When wealth inequality is included, the middle class favors debt lower than the WMD in the representative agent case, whereas the rich favor much higher debt-to-GDP ratios.

We study the link between the evolving age structure of the working population and

unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the considerable extent to which demographic changes over the last 30 years contribute to the decline of unemployment rate. Our findings have important policy implications given the expected aging of the working population in Europe. Furthermore, lowering inflation volatility is less costly in terms of higher unemployment volatility. It suggests that optimal monetary policy is more hawkish

in the older society. Our results hint also at a partial reversal of the European-US

unemployment puzzle due to the fact that in the US the share of young workers is

expected to remain robust.

After the Global Financial Crisis, productivity growth in many Euro Area countries fell behind non-Euro EU and other developed countries. While various explanations have been put forward, little has been said on the role of the Euro in decelerating recovery from exogenous shocks. Many prior applications of the synthetic control method (SCM), suitable to analyze the productivity impact of the Euro, have excluded crises altogether, made false assumptions or violated other underlying requirements. With a transparent and manipulation-free SCM application to Finland, results reveal the inability of this previously highly competitive economy to recover from exogenous shocks and restore prior productivity growth despite the implementation of various remaining available policy measures. Extensive robustness checks confirm a huge welfare loss.

Are austerity programs successful in reducing deficits and how do they affect public finances and the economy more generally? We examine the consequences a municipal debt relief program by the Hessian state government in 2012 which provided partial debt relief to 78 municipalities while enforcing budget balance. We compile a novel dataset for 421 municipalities (2007-2016 period) and combine propensity score matching with a difference-in-differences design to identify causal effects. Targeted municipalities consolidate their budgets by increasing local property and business tax rates as well as cutting social and personnel expenditures. Overall, we find no adverse effects on local economic activity in bailout municipalities. However, women are more affected by consolidation induced public sector job cuts than men. We also detect a substantial negative impact of program participation on construction activity and house prices (in smaller municipalities).

In decentralized nations like Switzerland and Germany, local taxes are linked to tax schedules determined by superior governments. In such systems, a change to the tax schedule creates a vertical tax externality and affects local governments’ budgets downstream. To investigate this mechanism, I put forward a model of residence-based income tax competition

model with local taxes linked to a federal tax schedule. Comparative statics show that municipalities counteract federal tax changes by raising their own taxes (partially) undoing federal tax changes. A higher degree of tax competition shifts the fiscal adjustment more to reduced public good spending. To provide empirical evidence for the theoretical predictions, I exploit cantonal variation in income tax policy across 19 Swiss cantons and find

that, municipalities in treatment cantons increase their own taxes and reduce public expenditure and investment. Municipalities more exposed to tax competition put more focus on investment and expenditure than taxation.

This paper studies the effect of salient fiscal rules on public institutions. To retrieve the causal effect of salience on tax setting behavior and the soundness of local public accounts, we exploit both across- and within-variation in the visibility of reference rates in the German Lander’s fiscal equalization systems. We find that, more than the need to recover lagged data or interjurisdiction comparison, mathematical operations – mainly multiplications, averages, and rounding – are central determinants of non-salience. In turn, the inclusion of mathematical operations (especially if described in words without including a formula notation) leads to large errors in the tax setting strategies of municipalities which imposes significant and inefficient economic pressure on their finances.

In 1993, Finland transitioned from a global or comprehensive income tax to a dual income tax (DIT) system. An overlooked side-effect of the reform was the removal of capital income from the local income tax base. Since local income taxes are an important source of revenue for Finnish municipalities, the reform resulted in negative revenue shocks where capital was concentrated. In this paper, we examine the local response to the change in the tax base and the increase in after-tax inequality. We first analyse the fiscal policy response to greater grant dependence but reduced tax competition due to the removal of the most mobile part of the income tax base. Next, we evaluate how election turnout and voting patterns change in response to the reduced taxation of capital income recipients and the associated rise in inequality, using the loss of taxable income as a salience mechanism.