Tax audits are essential for governments to raise revenue but can create economic distortions. To avoid an audit, firms may remain small, move to the informal sector, or shut down. Leveraging administrative tax data from the Ugandan Revenue Authority (URA), a novel linked survey, and a regression discontinuity design (RDD), we show that audits have a dual negative effect: They reduce the tax revenue collected from audited firms and impose large economic distortions. Audited firms are 11 percentage points likelier to shut down, and those that remain operational reduce their output. Back-of-the-envelope calculations indicate that the overall revenue collected from audited firms declines. The total wage bill loss induced by the audits is equivalent to 0.2-0.6% of the total wage bill of the formal economy at baseline, suggesting that the auditing process potentially imposes a large distortion to the Ugandan economy.

I estimate the effects of tax audits on firm direct and indirect tax evasion as well as non-compliance in Pakistan using the universe of tax returns filed by registered firms between TY2008-TY2021. I leverage 7 years of natural experiments, during which time Pakistan varied audit eligibility policies between full eligibility, in which all firms are eligible; parametric eligibility, in which only evasive firms are targeted and eligible; and risk-based eligibility, in which only non-compliant firms are targeted and eligible. Despite changes in audit eligibility, each policy retained random audit selection conditional on eligibility, which I leverage for identification. This context allows me to estimate the static and dynamic effects of tax audits on different populations of firms (i.e., evasive firms and non-compliant firms) and estimate heterogeneous effects of tax audits based on the size of firms. Additionally, I provide evidence on the effect of simply being eligible for an audit.

Do third-party auditors act as watchdogs of tax administration or do they help firms misreport taxes? We answer this question by examining firms response to audit notches - defined as discontinuities in audit requirement - and exogenous policy-induced changes in notches. Using Indian administrative panel data, we develop a novel empirical framework that considers dynamic responses of a firm to notch and conduct a difference-in-differences analysis. Our estimates suggest that firms remit 20 percent higher taxes and report 16 percent higher taxable income, because of third-party audits. Using these estimates, we conclude that the policy is cost-effective and raises net social benet.

Making use of a unique administrative data set for the period 2013-2020 consisting of the universe of administrative filings for the Corporate Income Tax (CIT) and Value-Added Tax (VAT) in Uganda, this paper investigates the impact of tax audits on voluntary compliance among audited firms in subsequent periods. Using matched-difference-in-differences approach with similar unaudited firms as controls, and a stacked design to address the staggered treatment, there is some evidence that audited firms report greater corporate income tax after the audits. The consequences on VAT reporting depend on the number of audits: the response is lagged after the first audit for multiple-time audited firms, likely to reflect the need to audit these taxpayers more than once.

As tax competition and profit shifting have put pressure on corporate income tax rates across the world, the role of other capital taxes becomes more important. This paper studies the choice between income taxation at the corporate and shareholder level. I develop a tractable sufficient-statistics framework to determine optimal corporate and shareholder income taxes. The main result is that when the incidence of the corporate income tax on workers is higher than that of shareholder income taxes, lower tax rates on corporate relative to shareholder income are typically optimal. In a policy application, I derive optimal reform directions for corporate and shareholder income taxes for a large economy, the United States, and a small open economy, Norway.

This paper examines firms' behavioural responses to Costa Rica’s 2019 corporate tax reform, which reduced the system’s distortions but decreased simplicity. Using 2016–2023 corporate tax return data and a difference-in-differences design, we analyse how firms adjusted to rich tax changes. Our descriptive analysis suggests that the reform reduced revenue and cost manipulation, previously evident in bunching around revenue thresholds and profit margin discontinuities. Furthermore, our causal findings reveal two key patterns. First, firms responded asymmetrically, reacting more strongly to tax cuts than increases, suggesting reported profits are downward sticky due to audit risks and evasion costs. Second, firms’ intensive margin responses were driven by marginal rather than average tax rates, contrasting with previous evidence showing that individuals misinterpret and over-simplify tax schedules. These findings align with profit-maximisation theory and suggest that well-communicated tax reforms can enhance efficiency without increasing compliance errors, even at the cost of reduced simplicity.

Special Economic Zones (SEZs) have become an increasingly popular policy tool for promoting economic development and countries provide preferential tax incentives to attract firms into SEZs. Using unique South African administrative data—firm-level corporate tax returns merged with worker-level income tax returns—we propose an alternative method for identifying SEZ firms beyond self-reported data, based on tax payments and employee location. Additionally, we will examine how the establishment of SEZs changes the behaviour of firms within SEZs. We contribute to the literature by identifying firms that exploit preferential tax incentives of SEZs firms to avoid tax payments, despite not being entitled to such benefits, while also enhancing our understanding of the impact of SEZs in a developing country context.

The Distributed Profit Tax (DPT)--a system that defers corporate taxes until profits are distributed to shareholders--has emerged as a prominent alternative to traditional CITs. This paper provides a comprehensive analysis of the DPT, examining its theoretical underpinnings and empirical effects across five countries that have adopted the system. We show the theoretical difference between the DPT, the S-based cash-flow tax and CIT, which implies that the impact of the DPT on investment and financial structure is ambiguous. Our empirical findings indicate that the introduction of DPTs significantly reduces tax revenue, with profit tax revenue declining by approximately 1 percent of GDP, on average. Additionally, DPTs lead to higher profit retentions and modest reductions in debt-to-asset ratios, while investment effects are statistically insignificant.

This paper examines the interaction between the executive and legislature in public finance, using unique data from Italian municipalities. Utilizing a generalized difference-in-difference strategy, it finds that a larger presence of executive politicians leads to increased expenditures, primarily driven by higher investments financed through capital transfers, while a larger number of councilors constrains public spending. These patterns reflect specialization within a larger executive body and political fragmentation within the council. Voters respond positively to the additional spending by the executive, supporting upward career movements for the mayor and reappointment of executive board members, whereas councilors do not benefit from their spending behavior. This research enhances understanding of the complex relationship between political class size and state finances, which has been found ambiguous in existing literature.

We examine how municipalities in the German state of North Rhine-Westphalia respond to the requirement of submitting a consolidation plan in the face of budgetary imbalances. Using an event-study approach with staggered treatment adoption, we compare municipalities facing this requirement to those in similar fiscal situations that are not obligated to submit a plan. We find that municipalities required to submit a plan focus on revenue adjustments. Beyond this, we highlight a largely overlooked strategy: municipalities increasingly turn to their state-owned enterprises to offload investment tasks. Our findings suggest extended fiscal supervision not only shapes municipal core budgets but also triggers creative consolidation strategies.

This study examines the sustainability and threshold levels of public debt across different tiers of government in India using data from 1990-91 to 2020-21, applying the fiscal policy response function and threshold regression method. The findings indicate that both central and state government debt levels are unsustainable, with estimated sustainability thresholds of 40% for the Centre and 22% for the states. As the current debt levels impede economic growth, fiscal discipline is essential. Debt dynamics simulations suggest that maintaining a nominal GDP growth rate of 12% and a fiscal deficit target of 2% for both the Centre and states from 2024-25 onwards would help achieve debt sustainability. Under these conditions, the Centre could meet its target by 2027-28, while states could do so by 2030-31. The study emphasizes the need for revenue augmentation and expenditure rationalization, particularly reducing unproductive subsidies, to ensure long-term fiscal stability.

This paper explores the effects of formal limits on US municipal debt. Based on a theoretical analysis of fiscal policy under uncertainty, we argue that governments facing a debt limit may take precautions, in order to keep budget flexibility if adverse shocks are realized. To test this prediction, we use a panel of US municipalities and exploit institutional variation in existence and height of state-imposed debt limits. Our preliminary results suggest that US municipalities follow a prudent debt policy and plan for lower levels of debt when facing debt limits. When we look at total debt rather than the type of debt that is regulated by the statutory debt limit, the effect of the debt limit appears much weaker, which raises doubts about its overall effectiveness.

Intra-family wealth transmission has been shown to reinforce inequality and dynastic privilege. So far, researchers have focused exclusively on taxation as the policy tool for dispersing private wealth. We instead consider inheritance law. Many countries force testators to leave certain minimal estate shares to direct descendants. Relaxing such constraints could allow wealth to be spread more widely. We explore this possibility in a unique dataset on 16,933 wills established online before and after a reform of inheritance law in Switzerland. Applying a difference-in-differences estimation strategy, we find that lower minimum shares for direct descendants were used primarily for increasing the shares given to spouses and life partners. Estate shares flowing to heirs outside of the core family barely increased. We infer that intra-family bequest motives remain so strong that greater testator freedoms are an ineffective tool for increasing the dispersion of wealth at the time of transmission.

I examine behavioral responses to inheritance and gift taxes in a setting where individuals knew the tax would increase three months before the new tax code took effect. Using tax microdata from Brazil, I employ bunching and difference-in-differences (DD) methods and find that individuals significantly retime their wealth transfers to avoid taxes. Retimed gifts resulted in smaller inheritances for nearly three years. Moreover, I find that responses are sensitive to changes in top gift marginal tax rates and tax design (flat rates vs progressive brackets). Finally, the number of declared bequests decreased in the medium run in reform states, particularly among small inheritances.

We study the impact of the UK house price boom on the intergenerational persistence of homeownership, housing wealth, location and earnings. Increases in local house prices have a negative effect on homeownership and increase the intergenerational persistence of housing wealth. We show that by age 28 to 27 around 10\% to 20\% of parental housing wealth gains are passed through to children's housing wealth. This effect on housing wealth inequality is explained not by higher homeownership rates but by the children of wealthier parents being more likely to move to and own a home in London. Moving to this high house price and high earning part of the country comes alongside an effect of parental wealth on occupation choice and earnings.

We study individual earnings responses to positive wealth shocks from bequests and lotteries. In a life-cycle model, we show how responses may differ depending on the age of the recipient. Tracking earnings responses to 269,000 positive wealth shocks in Swiss individual-level tax records, we confirm the qualitative predic- tions of the model: irrespective of the source of the wealth shock, average earn- ings responses are consistently negative. The strongest responses are found for older workers – partly through early retirement –, and for women. Conditional on age, inheritance triggers weaker earnings responses than lottery winnings, which is consistent with anticipation effects. We use the calibrated model to simulate the effects of inheritance taxation and of shifting the age distribution of intergenera- tional transfers, e.g. via incentivizing inter-vivos gifts.

This study investigates the impact of public investment in infrastructure into private capital formation and economic growth in Tanzania using time series data over thirty years’ period (1990-2020) and applying vector autoregressive (VAR) model. The findings show that increasing public investment in infrastructure negatively affects private capital formation in the short run due to the dominance of the crowding-out effect. However, the effect turns positive and significant in the medium term due to the dominance of crowding-in effect; but are short-lived as they die in the long term. The impact of increased public capital stock in infrastructure on private capital stock is positive, implying both private capital formation and private capital stock positively affect real GDP growth, implying crowding-in effects of public capital stock in infrastructure, and the complementarity effect between the two. The low magnitude and short-lived effects are reflective of the unfavorable environment for private investment in Tanzania.

The paper examines the link between public infrastructure investment and the private corporate investment links in India for the post pandemic period. Using the high frequency data, the paper analyses the empirical links for the differential impacts of public infrastructure and non-infrastructure innovations on private corporate sector. The results of ARDL models reinforced that there is no crowding out effects in India. The macroeconomic variables including cost of credit – both long term and the short-term rates of interest - and the output gap have been as significant as public investment – in particular public infrastructure investment – in determining private corporate investment in the medium and long terms, which has crucial policy implications.

In India, there is significant divergence in industrial performance across states, especially after the economic reforms. In this context, this study analyses manufacturing performance at the sub-national level and the role of the state therein. The changing role of the state is particularly important considering the policy shift towards a market-led economy. This study focuses on the role of public infrastructure in explaining the divergence in manufacturing performance.

Public infrastructure is a multidimensional concept, and we constructed three sub-indices physical, social, and financial infrastructure to measure its impact on manufacturing performance. The study considers only the registered manufacturing sector and 16 major states in India due to their significant contribution to manufacturing value added. Panel regression techniques were used for the econometric analysis, highlighting significant disparities in both physical and social infrastructure across states. The study found that regional disparities in infrastructure availability are a major determinant of manufacturing disparity across Indian states.

We develop a novel quantitative spatial equilibrium model that endogenizes the government’s decision to invest in transport and electricity networks. Electricity quality influences local sectoral productivities, while road quality affects trade costs. We show that network complementarities in general equilibrium are primarily shaped by trade routes and the elasticity of substitution between consumption products. Our calibrated model for the Brazilian economy indicates significant welfare gains from reallocating infrastructure investment, with spatial complementarities in heterogeneous infrastructure provision ac-

counting for a substantial portion of these gains. Our results demonstrate that lack of coordination and budget sharing between different line ministries are important sources of misallocation.

When studying the welfare effects of pay-as-you-go social security systems, efficiency gains due to risk-sharing are contrasted to welfare losses due to distortions. In related literature distorted saving decisions leading to crowding out of capital are identified as a major source for welfare losses. Many studies find that the costs of introducing social security outweigh the benefits.

But to my knowledge the literature so far disregards positive welfare effects of social security due to shifts in the asset portfolio of households. I study an overlapping generations model featuring idiosyncratic asset return risk and portfolio choice and find that social security benefits stipulate households to shift their savings to riskier assets with higher returns. Whether we encounter crowding in or out depends on the level of the risk-free rate and its elasticity with respect to changes in the quantity of the safe asset.

We investigate the influence of different levels of profit tax uncertainty of firms on their investment plans in Germany. To isolate this effect, we conduct a surveybased randomized control trial with tax uncertainty treatments. First, profit tax forecasts by scientific tax experts are used to fix the first moment of future profit tax uncertainty across all treatment arms. Firms are then randomly assigned to receive one of two tailored information treatments that vary in the level of uncertainty about the first moment. Our empirical analysis reveals that increased perceived tax uncertainty leads to reductions in planned investments in both capital expenditures and intangible assets over the subsequent periods.

The study integrates two distinct datasets concerning the Indian economy: effective tax rates sourced from the union receipt budget and gross value added from national account statistics. Employing panel regression with Driscoll-Kraay standard errors on the merged data spanning from 2011-12 to 2020-21, the research examines the determinants of effective tax rates within segregated manufacturing industries. Notably, the study underscores that existing regulations or tax structures may impede effective tax rates for Indian manufacturing industries. Additionally, it reveals a non-linear inverted U-shaped relationship between industry size and effective tax rates, suggesting that industry expansion beyond a certain threshold leads to a decrease in effective tax rates. Furthermore, the study posits that an effective and corruption-free government can enhance effective tax rates for Indian manufacturing industries at segregated levels. It also highlights how the availability of optional lower tax rates serves as an incentive for these industries to opt for this tax-saving opportunity.

Financial resilience in old age is a major challenge in rapidly aging societies. In this paper, we study the role that subjective life expectancy plays in the decision to save and participate to the financial market among the elderly and how it interacts with financial literacy. We empirically show that the discrepancy between subjective survival beliefs and objective survival rates affects the decision to save and participate in the stock market and we document that this discrepancy is correlated with financial literacy. We then set up a quantitative life-cycle model to simulate alternative policy interventions. We find that survival literacy interventions informing individuals about their objective survival chances attenuate the longevity risk by encouraging wealth accumulation. Financial literacy policies lowering the costs of participating to the stock market incentivize investment in risky assets, but they benefit wealthy households more.

The study focused on assessing the level of tax compliance in South Africa and what factors explain the level of compliance.World Values Survey data on South Africa were used to assess the tax side of fiscal policy, how taxpayers’ response to the policy affects compliance and what matters for compliance.Descriptive statistics and an ordered logistic model were employed on longitudinal data.The study revealed that the perceptions, attitudes and behaviours of South African taxpayers have generally shifted from a society that values tax compliance to a nation that justifies tax evasion. The main factors that shape perception and behaviour towards tax compliance are demographic factors, the level of confidence in the government and patriotism. The study recommends considering cognitive and behavioral factors when designing and communicating tax policies to better fit South Africa's unique socio-economic landscape and finance public service delivery.

We explore how teaching basic taxes to future taxpayers helps build the tax culture under low capacity. We use novel randomized survey experiments embedded into a large tax awareness campaign towards young adults in Cameroon. We randomly assigned 1962 public and private secondary school students from 42 classes to tax informational treatments. We provide causal evidence of significant effects on basic tax knowledge and compliance attitudes with differential treatment effects across gender, risk attitudes and family background. Our results also indicate strong effects of the informational treatments for cohorts of students at both tails of the knowledge and tax morale distributions. Interestingly, our findings highlight the high potential for scalability and offer a new perspective on the political economy of tax educational reforms for improved compliance norms towards complying with taxes among younger and potentially entrepreneurial populations.

This paper examines the impact of governance quality on tax revenue mobilization in Africa. It utilizes an instrumental variables approach. Our results indicate that political participation including factors such as political party freedom, voting, democratic preference, elections, and satisfaction with democracy enhances tax revenue mobilization. Also, tax compliance perception significantly fosters tax revenue mobilization, suggesting that as public trust in the tax authorities’ integrity improves, people are more likely to comply with tax obligations, thereby bolstering revenue. Furthermore, public service delivery (access to education, healthcare, and security) has a positive effect on tax revenue mobilization. Institutional trust also strengthens public support for tax policies, amplifying tax revenue mobilization. These findings underscore that the public's perception of governance quality shapes the level of support for tax policies aimed at increasing revenue. Therefore, policymakers must focus on enhancing governance quality to significantly strengthen the tax systems across Africa.

Using data from the latest wave of the Afrobarometer surveys, we examine the heterogeneous effect of corruption perception on tax morale across resource-rich and -poor countries in Africa. We find that perceived levels of corruption among public officials reduces the intrinsic willingness of individuals to pay taxes to the state and the effect is heterogenous across resource-rich and -poor countries in Africa. Specifically, the availability of natural resources (and their exploitation) in a country attenuates the tax morale-reducing effect of corruption perception in Africa. This implies that policies to deepen domestic revenue mobilisation must be context specific.

How can unconditional welfare transfers encourage households to allocate more resources to children? We conducted a nationwide randomized controlled trial in Georgia to test two approaches: providing food vouchers instead of cash and labeling cash transfers to promote child-related spending. Compared to cash alone, we find that labeling transfers significantly increases the share of household expenditure on children. By contrast, infra-marginal food vouchers reduce overall household consumption without altering its composition. This reduction likely stems from the higher shopping costs at voucher-accepting stores. Our findings suggest that subtle

interventions like labeling can avoid the drawbacks of more restrictive, paternalistic policies.

The dependency on imported essential production inputs poses a threat of abrupt price hikes and shortages, potentially triggered by political events. The energy crisis resulting from the Russian war of aggression is an example. This paper investigates whether governments should bolster production via transfers or cost subsidies in the event of a crisis, utilizing a dynamic multi-sector economic model that is calibrated to Germany and incorporates endogenous firm entry and exit. Our findings suggest that subsidizing production costs is more beneficial for economic activity and welfare, provided the energy demand due to the subsidy does not significantly influence the price of the essential production input. If it does, this approach could become exceedingly expensive. In such scenarios, it is economically more efficient to provide lump-sum transfers to firms. The effectiveness of these policies ultimately hinges on their impact on the price of the imported input.

Cash transfer programmes have come to dominate government efforts to reduce poverty. Whilst effective at providing short-term relief, these programmes may also undermine long-term poverty reduction by disincentivising labour supply. To study whether cash transfers enhance or depress labour supply, I measure the effect of an exogenous increase in Brazil's main cash transfer on the labour supply of men and women. I find no effect for men, while women increase their labour supply by 7.4% over two years. This is driven by mothers, for whom the transfer relaxes childcare constraints, enabling them to join the labour force. Leveraging discontinuities on the allocation of education funds to Brazil's 5570 municipalities, I find that the effect is stronger in areas receiving more education funds. Overall, my paper illustrates that there is no trade-off between short-term relief and long-term poverty reduction. Rather, cash transfers encourage women’s labour force participation, particularly when complementary public goods are available.

We consider the effect of childcare attendance and maternal employment on the health outcomes of young children in a low-income setting. We exploit exogenous variation introduced by a randomized childcare subsidy program in an urban informal settlement in Kenya which provided mothers of 1 to 3 year-olds with 12 months of fully subsidized childcare. We find positive effects of increased childcare attendance on the probability of experiencing symptoms of communicable illness, which we attribute to increased exposure to disease in group settings. Our evidence points to the possibility that the income effect from the subsidy offsets this negative effect. We find little effect of maternal employment on child health, with the exception of improved overall child health reported by mothers with children already in care prior to the intervention. The intervention also included a quality enhancement treatment arm, but we find little evidence of any additional effect on child health.

This paper quantifies how much people would be willing to pay to remove frictions that prevent them from working their ideal number of hours using two sufficient statistics: (1) the percentage difference between ideal and actual hours and (2) the Hicksian elasticity of ideal hours with respect to the after-tax wage rate. We estimate willingness-to-pay to remove these frictions in the U.S. and Germany. Three core findings emerge: (1) adjustment frictions—including fixed costs, discrete choice sets, and search costs—are costly for any reasonable value of the Hicksian elasticity, even when accounting for endogenous wages, multiple labor supply decisions, and dynamics; (2) the cumulative cost of adjustment frictions and tax misperceptions is even larger, with individuals willing to pay at least 10% of their income on average to remove both; and (3) adjustment frictions are much costlier than tax misperceptions.

How do employers respond to automation shocks? We investigate this question using a randomized information intervention that exogenously shifts employers’ beliefs about automation rates of their workforce. Focusing on the tax consulting and auditing sectors—where well-defined job titles and high exposure to generative language models create credible automation potential—we assign firms to one of three treatment groups or a control group. Treated firms revise revenue and profit expectations upward but do not alter hiring or firing decisions, suggesting automation enhances efficiency without immediate labor displacement. Notably, wages remain unchanged, indicating firms intend to retain productivity gains rather than share them with employees.

This paper examines the heterogeneous effects of the Tax Cuts and Jobs Act (TCJA) of 2018 on firms with varying capital intensities and the subsequent labor market implications. Using firm-level Compustat data, we document that capital-intensive firms benefit disproportionately from corporate tax reductions, leading to higher sales growth. We develop a theoretical model to rationalize this pattern and to analyze wage adjustments in response to increased firm profitability. Relying on a fair-wage mechanism, our model predicts that wage increases are more pronounced in capital-intensive sectors. Using county-level employment and wage data, we implement an event-study approach to quantify labor market effects, finding that wages rise more in capital-intensive regions, reinforcing pre-existing wage disparities. Our findings have important implications for regional inequality in the U.S., as the counties that benefited most from the tax cuts already had higher wages prior to the reform.

We provide evidence on the impacts of job loss among female factory workers in Ethiopia and on how these impacts can be mitigated. We leverage quasi-experimental variation in job loss, experimental variation in job-loss support payments, and high-frequency data spanning a period of 13 months after displacement. We find that job loss is a persistent shock that reduces employment and consumption spending for longer than one year, and almost doubles the rate of poverty. An additional lump-sum payment encourages early spending and reduces both overall and manufacturing employment. In contrast, providing an equivalent amount in monthly tranches -- a payment modality preferred by a majority of workers -- enables workers to better smooth consumption expenditures without negative employment effects. We show that workers have high willingness to pay for additional job-loss insurance, but also heterogeneous preferences over the payment modality. This generates a key trade-off between workers' private welfare and the government industrialization objectives.

As the world enjoys greater financial globalization, developing countries continue to accumulate sovereign debts. Despite the promise of sovereign debt to raise national output, and improve the lives of the “have-nots”, income inequality has widened and continues to rise within and among countries. This is suggestive of debt that undermines justice in the distribution of incomes. This essay analyzes the extent to which accumulation of sovereign debt affected income inequality in the East African region. The global financial crisis evidenced in the year 2008 serves as a benchmark. The analysis covers the period from 1996 to 2022. The system generalized method of moments reveals that accumulation of debt was overbearing among the poorest 10percent. Income inequality rose as debt increased, suggesting that as the stock of debt rose, incomes among the poorest decile decayed faster than incomes among the richest 10percent. This effect was dampened by the global financial crisis.

This paper examines the impact of international tourism on tax revenues in African countries using data from 1990 to 2020 and an instrumental variable fixed effects model. The study finds that tourism receipts have a positive and significant effect on nearly all tax revenues, except personal income tax. Additionally, this impact is influenced by factors such as income level, institutional stability, and the presence of a coastline, indicating that advanced economies with stable institutions and coastal access benefit more from tourism. The results suggest that African governments should implement clear tourism development strategies to enhance infrastructure and destination competitiveness. Furthermore, strengthening tax administrations is recommended to fully capture the economic benefits of tourism. Overall, international tourism is portrayed as a vital tool for diversifying African economies, creating jobs, and reducing the size of the informal sector.

This paper evaluates the administrative costs of delivering social protection programmes in Sub-Saharan Africa and Latin America, integrating real-world estimates into SOUTHMOD tax-benefit microsimulation models. We focus on five programme types—means-tested, proxy-means-tested, non-means-tested, and in-kind benefits as well as public works—and assess how administrative costs shape total spending and reduce the effectiveness of poverty reduction efforts. Our findings show that, even with large overhead, means-tested cash benefits achieve the greatest gains in lowering poverty per budget dollar. Meanwhile, programmes with more complex delivery, namely in-kind transfers, tend to incur higher administrative expenses that diminish their cost effectiveness. Public works initiatives also face overhead but can deliver robust results. Non-means-tested cash benefits are simpler to administer but frequently reach broader population groups than intended. By including administrative costs, policymakers can form clearer budget plans that balance programme design choices against their real impact on fiscal sustainability and social goals.

This paper provides novel evidence on the impact of a prominent place-based policy - Special Economic Zones (SEZs) - on the economic well-being of African households. Exploiting time variation in SEZ establishment on a dataset of repeated cross-sections of households in 10 African countries during 1990-2020, we show that households living near SEZs become wealthier relative to the national average after SEZ establishment. The effect accrues mostly within 10 km of SEZs, is not driven by selective migration, and is accompanied by improved access to household utilities, higher consumption of durable goods, increased educational attainment and a shift away from agricultural activities.

In this paper, I estimate the valuation of flood risks in Sweden by looking at property sales. A hedonic price model combined with a distance defined difference-in-differences method is used to estimate the marginal change in property prices following increased salience in information regarding flood risks. The results reveal a robust effect on properties close to predicted floods from the sea. The willingness to pay

for increasing the distance to the predicted flooded area is estimated to be between 0.1 and 0.2% per meter using a linear specification. When allowing the marginal effect to differ depending on the distance fo the risk area it goes from no effect inside and close to the risk area to 1% at a distance of 100 meters. This implies that the effect is driven by the sales of properties that have some distance, but are still very close, to areas at risk of flooding

We study the effect of the introduction of the Deutschlandticket (DT), a large-scale German policy intervention that substantially decreased the costs of commuting by public transport, on housing prices. We use the introduction of the DT and cross-sectional variation in the reduction of commuting costs (by commuting distance) in a continuous-treatment difference-in-differences (DiD) setting. Our analyses are based on detailed data on commuting patterns on a municipality-pair level and extensive data on rental offerings from three large online platforms for our analyses. We document a small increase in relative rents in municipality pairs with higher cost savings from the DT. The effect is driven by smaller apartments and by municipality pairs with more feasible public transport commutes. Further heterogeneity results suggest that commuters use the cost savings to pay higher rents in more attractive housing locations, which aggravates existing housing market pressure in urban areas.

We analyze the real estate industry's influence on local housing supply in California, with a focus on how city council members with real estate backgrounds affect building permits from 1995 to 2019. Using data on candidate occupations and a close elections regression discontinuity design, we find that electing a developer to city council increases the number of housing units approved by 68% during their term. This effect dissipates after the first term, suggesting that developers primarily influence zoning decisions rather than help pass broader regulatory reforms. Our analysis of council votes reveals that developers are particularly effective in securing discretionary zoning changes. Furthermore, we find no evidence of electoral backlash, indicating that voters generally support housing construction. In a time when building new housing is difficult, our study suggests that electing pro-housing candidates could help expand housing supply.

This study investigates the impact of property taxation on housing supply using a comprehensive dataset of 22,913 property tax rate changes across German municipalities. Leveraging an event study approach, we identify significant negative effects of property tax increases on the property tax base, housing supply, and local population growth, with the strongest impacts observed in small and West German municipalities. Our findings underscore the distortive effects of property taxation on housing markets, indicating that higher property taxes may exacerbate housing shortages. Notably, as taxable property values in Germany remain fixed and independent of tax rates, our analysis isolates the extensive margin response of the property tax base—manifested through changes in housing supply—in reaction to tax hikes.

We propose a methodology to estimate the impact of the 2024 global minimum tax on the effective tax rates of multinational enterprises. Using a dataset of 1,300 multinationals operating in Czechia from 2017 to 2022 (nearly 300,000 firm-country observations), we assess three main objectives of this reform: (i) increasing tax contributions, (ii) reducing profit shifting, and (iii) decreasing tax rate disparities. Our findings suggest that effective tax rates will rise significantly, increasing the average tax rate by approximately 4 percentage points and generating an additional €200 billion in revenue. This will also narrow intra-firm tax rate disparities, particularly affecting ‘internal profit centers’—affiliates with a high share of intra-firm revenue. Finally, by reducing tax rate differences across firms, the reform would result in a more equitable tax system, limiting profit-shifting opportunities for large multinationals and aligning their tax burdens more closely with smaller firms.

In 2021, the OECD announced that over 130 jurisdictions supported its “Pillar 2” proposal for a 15 percent global minimum effective tax rate for large multinational enterprises. This proposal has since been adopted unanimously by the European Union, and has come into force on 1 January 2024. We employ an event study methodology using daily 2021 stock market returns of 1.782 EU and US firms to determine how Pillar 2 announcements affected the value of firms subject to the global minimum tax, and that of their competitors. We find a significant negative impact on the stock market returns of directly affected US firms, while the impact on EU firms appears to be limited, suggesting investors in EU are less worried about the impact of future anti-tax avoidance regulations. In our current specifications, we find no conclusive evidence of a causal effect on the stock market returns of their competitors.

This paper examines the impact of the 2017 US Tax Cuts and Jobs Act (TCJA) on the investment behavior of US multinational corporations (MNCs) in Germany. The TCJA introduced substantial corporate tax changes, including a reduction in the US corporate tax rate, full expensing of certain capital expenditures (bonus depreciation), and the Global Intangible Low-Taxed Income (GILTI) provision, which altered incentives for foreign investment. Using a triple difference-in-differences framework and firm-level data on foreign-owned subsidiaries in Germany, this paper investigates whether US MNCs reallocated investment towards the US or increased tangible investment in Germany in response to the tax cut and GILTI. The findings shed light on the trade-offs between tax-motivated profit shifting and real economic activity in high-tax jurisdictions.

This paper characterizes profit shifting behaviour across the size distribution of multinational firms to evaluate the appropriate targeting of the recently introduced Global Minimum Tax (GMT). We document that the propensity to use tax haven subsidiaries increases substantially with group size. Second, we introduce a new methodology to estimate shifted profits at the group level and find an exponential group size gradient in profits shifted to tax havens. Lastly, we relate the potential tax revenue gains from the GMT to the compliance costs of MNEs and conclude that revenue gains clearly dominate compliance costs for large groups currently covered by the GMT and that potential net revenue gains from lowering the threshold are modest.

In 2019, almost 100 local governments in Poland voted to declare their localities "free from LGBT ideology." We study the effects of these declarations on migration intentions using unique data on domestic and international job search from a large global job site. Comparing counties with anti-LGBTQ resolutions to neighboring counties in a difference-in-differences design, we find that the resolutions increased domestic out-of-county job search by 12 percent and international job search by 15 percent, driven by European destination countries with high standards of LGBTQ rights.

Despite economic disparities, migration from developing to advanced economies remains low because people do not know whether and how they can migrate, are not allowed to migrate, do not want to migrate irregularly, or cannot afford to migrate. This paper examines how informing individuals about legal migration pathways affects aspirations for mobility and qualifications. We conduct an experiment in rural Senegal, providing information and basic assistance on the U.S. Diversity Visa Lottery, which offers medium- and high-skilled migrants access to permanent residence. The intervention significantly increases migration intentions and shifts preferences toward legal pathways. However, ineligible individuals, particularly those already contemplating irregular migration, show increased interest in irregular migration, which may be seen as an unintended consequence. Education aspirations increase only weakly at high baseline aspirations. Aspirations already surpass the visa policy requirements for most respondents, but participants lack the capabilities to achieve them.

This paper studies a place-based tax cut implemented in the Argentinean Patagonia. I examine the effects of this policy on wages and employment, and assess potential unintended consequences such as firm or worker reallocation across regions using employer-employee matched panel data and a stacked event study design. I also conduct firm-level analyses to explore how employers adjusted wages and employment in response to the reform. Preliminary results suggest the cumulative number of movers to the treated region increased after the policy. There is a positive wage premium for moving to Patagonia versus moving to other regions, although the magnitude of the premium decreases for moves after the tax cut. This finding is compatible with the idea of a higher portion of pay “over-the-table” for potentially treated workers. Ongoing analysis explores the mechanisms behind these effects and the broader welfare implications of place-based policies.

Refugees' return migration decisions are of great importance for both their origin and host countries. We examine whether geopolitical factors and international alliances directly impact micro-level migration decisions. To derive causal estimates of how the post-war security situation and economic prospects affect return decisions, we conducted conjoint experiments among Ukrainian refugees across 30 European countries. In the experiments, respondents were asked how likely they expect to return to Ukraine under different scenarios. Territorial integrity and security guarantees are crucial, but economic prospects also play an important role. While the majority of respondents expect to return in the most optimistic scenario, only one in eight expects to return in the most pessimistic scenario.

This paper provides evidence on the strategic use of owner-controlled firms as a means of tax avoidance under dual personal income taxation. Taxpayers with sufficiently high income levels have incentives to shift income toward corporations, as the combined tax burden of corporate and capital income taxes is lower than that of labor income taxation. We exploit linked micro-data from personal income tax returns and various other sources, leveraging multiple tax reforms in Spain that introduced variation in these incentives across taxpayers and over time. This approach allows us to causally identify the magnitude of income shifting behavior. We find significant tax-motivated responses among business owners, with a 15 percentage point increase in the likelihood of income shifting when the tax-saving incentive becomes active. Our results highlight the importance of this form of tax avoidance from both equity and efficiency perspectives.

This paper examines how capital gains tax legislation shapes business sales in Germany. Using detailed income tax data on a representative sample of German business owners, the paper documents the characteristics of sellers and analyzes their post-sale behavior. A regression discontinuity design provides evidence of a substantial jump in the number of transactions around a discontinuity in the capital gains tax rate, suggesting that lock-in effects play a significant role. Entrepreneurs with larger capital gains and worse outside options respond particularly strongly to the discontinuity. The results have implications for our understanding of how capital gains tax provisions affect entrepreneurial decisions and broader economic outcomes.

Inheritance and gift taxes can force liquidity-constrained family-owned businesses to discontinue operations due to the tax burden, making preferential tax treatment for intra-family transfers an appealing policy. However, such policies may also encourage less capable firm owners or CEOs, complicating the assessment of their overall economic benefit. This study examines the impact of a 2004 Finnish inheritance and gift tax reform, which reduced the taxable value of intra-family successions from 100% to 40%. While previous research has focused on the performance implications of family vs. external ownership transitions, little attention has been given to their effect on firm survival, particularly in the context of tax reform. Our preliminary findings suggest that family firms undergoing intra-family successions after the reform differ significantly from those before, particularly in size, industry, and CEO characteristics. We hypothesise that the reform will improve survival, though possibly at the cost of firm performance.

We assess tax and real economic implications of facilitating the option to incorporate by physicians in Canada, by exploiting the 2006 reform in Ontario which allowed family members to own shares in these businesses. The administrative tax data allows us to trace individual and businesses incomes, both corporate and unincorporated, and taxes for as many as 12 years after the reform. We use a triple-differences design, comparing the outcomes of physicians in Ontario with other high-income professionals and other provinces. The reform stimulated incorporation. Pre-tax personal income and taxes paid (aggregated at the family level) significantly decrease, while their pre-tax business income and corporate taxes substantially increase. The overall income (personal and corporate combined) increases while the average effective tax rate decreases after the reform. Taken together, these results are consistent with both tax avoidance through a corporation and real response via business expansion after incorporation.

This paper examines the long-term effects of inheritance rules on economic development and intergenerational mobility. We exploit a historical natural experiment in pre-revolutionary France, where inheritance customs varied sharply: some regions mandated equal division among heirs, whereas others allowed inheritance favoritism. Using a spatial regression discontinuity design and a rich dataset spanning up to 600 years, we estimate the causal effect of inheritance regimes on long-run economic outcomes. Our analysis relies on detailed genealogical records of over six million individuals born between 1400 and 1900 near the inheritance border. We find that historically egalitarian areas exhibit higher income, lower poverty, and reduced inequality today, even more than two centuries after these rules were abolished. Additionally, we show that the positive effects of equal inheritance on life expectancy already emerged for generations born before the French Revolution.

We provide new evidence on the impact of inheritance receipt in early adulthood on a range of economic outcomes. We use rich administrative data from the Netherlands and an empirical strategy that exploits randomness in the timing of parental and grandparental death. We show that a euro of inheritance leads to an initial increase in wealth of 40¢, which shrinks by half over the following seven years. Half of this initial increase comes from a rise in property assets, which is much more persistent than the increase in other assets. Each euro inherited also leads to a 2¢ fall in annual labour income, with larger falls for younger individuals. There is a small positive effect on business income for recipients with low wealth before inheritance receipt, suggesting that inheritances alleviate credit constraints for some. Our results have important implications for the design of policies such as inheritance and gift taxation.

In this work, I find significant exposure effects of childhood neighborhoods on intergenerational income mobility and on the probability of matriculating from high school. However, these effects disappear when controlling for family fixed effects, suggesting differential selection of families on age at move of the child.

I conclude that the differences between regions are likely to stem from sorting rather than from causal effects of neighborhoods. My results demonstrate that the studies conducted in the United States are not necessarily generalizable to the contexts of different societies such as the Nordic welfare state.

This paper examines the real effects of employment protection measures on firm performance by leveraging a unique feature of German inheritance and gift tax law. Specifically, we exploit the preferential tax treatment granted to gratuitous business transfers, which is contingent on meeting minimum holding periods and payroll sum requirements. To study these effects, we identify firm ownership changes triggered by the death of the owner, utilizing Orbis ownership data and publicly available death records. We merge this data with administrative employment data and employ a stacked difference-in-differences design, exploiting a size-dependent applicability threshold. By comparing firms subject to payroll-sum requirements to those exempted, we isolate the causal impact of these provisions, as both treatment and control group undergo an exogenous succession event. Our preliminary findings indicate that the minimum-employment requirements significantly reduce employment growth, with affected firms experiencing up to 20\% slower growth relative to the control group.

In the US and UK in particular, new retirees make complex decumulation decisions regarding defined contribution pension wealth. We use detailed data on wealth portfolios of people aged 50-64 in the UK to understand how people access DC pensions. Accessing pensions by making (taxable) lump-sum withdrawal is most common, and is associated with impatience but not with financial literacy. Some individuals use liquidity of DC wealth to pay off formal loans. Finally, many seem unprepared for their decumulation decisions: over 40% of 50-64 year olds do not know how they plan to access their DC wealth, particularly women and those with lower levels of wealth.

This paper examines the welfare effects of pension reforms that increase financial incentives to delay claiming. We leverage the 2015 Brazilian pension reform, which allowed workers past an individual-specific threshold to claim early retirement benefits with full replacement rate - a 30% increase at the discontinuity. Using novel administrative records on early retirement claims and labor market data, we estimate the substitution elasticity of pension claiming and the income elasticity of retirement. We extend the model by Kolsrud et al. (2024) to show that these elasticities, along with the income elasticity of claiming, are sufficient statistics for welfare analyses whenever claiming and labor market exit are separate decisions. Lastly, we evaluate whether informational channels are behind the lack of responsiveness to incentives. We show that easier access to social security offices does not have a significant impact, but that local knowledge of social security rules can affect responsiveness to financial incentives.

I provide a comprehensive analysis of the impact of a pure change in pension wealth on retirement behavior. I exploit a 2010 Norwegian policy reform that retroactively extended childcare-related pension credits to mothers of children born between 1967 and 1991. I quantify the resulting increase in pension benefits and assess the policy's potential to narrow the gender pension gap, along with any distortionary effects on labor supply and pension claiming. Using population-wide administrative data from Norway, I estimate pension benefits for all beneficiaries had the policy not been adopted and implement a difference-in-differences design, leveraging the variation in the credits' impact on final pension benefits. My findings show that the policy increased pension benefits by an average of 2.5%, contributing to a 1.6 percentage point reduction of the gender gap in lifetime pension benefits with small employment effects.

The share of retirees and the size of benefits paid are critical to determine an economy's aggregate pension spending. Increasing the statutory retirement age is a popular policy proposal to decrease the burden of aging populations on pension systems by decreasing the share of households eligible for pension benefits. However, in a system in which pension benefits are a function of lifetime earnings, changes in both the extensive and intensive margins of labor supply in response to a reform impact pension costs. Using a heterogeneous-agent OLG model with endogenous retirement choice and pension benefits, I study a 2019 Brazilian pension reform which increased the retirement age. I find that while the reform decreases aggregate pension costs, it leads to welfare losses for high-income households. Moreover, I find that a policy limiting the link between intensive margin labor supply and benefits leads to higher aggregate pension costs than the 2019 reform.

This paper investigates how recent expansions to the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) in Puerto Rico shape labor force participation, household income, and overall well-being. Employing data from the Puerto Rico Community Survey and a difference-in-differences framework, it finds that greater credit generosity correlates with higher employment rates, increased earnings, and reductions in poverty. Because these tax credits link benefits directly to earned income, they especially help low-income and female-headed families, long excluded from key federal tax provisions. Results also suggest that these policies reduce reliance on traditional welfare programs and boost household financial stability. By situating Puerto Rico’s policy shifts within broader U.S. and global tax credit experiences, this study informs policy decisions aimed at mitigating persistent poverty and stimulating economic mobility on the island. Overall, expanded EITC and CTC appear to be critical tools for improving the economic well-being of Puerto Rican families.

This study estimates the elasticity of taxable income (ETI) for the highest 1% of earned income individuals, utilizing a change in taxation in 2013, when a new top tax bracket was added to the earned income tax scale in Finland. There are not yet many estimates for the top income elasticity in the literature, even though their response is crucial in determining the income-maximizing level of personal income taxation. This study contributes to the top income ETI literature by employing a triple differences-in-differences method comparing changes in income within the same income groups for different time periods. The results, derived from a two-year estimation period, suggest that the ETI for top earners may be higher than shown in the previous population estimates. This finding is primarily driven by individuals experiencing fewer labour market frictions, such as those who have changed employer or have multiple employers during the studied period.

This paper leverages administrative tax data from Kenya to make several contributions to our understanding of personal income taxation in developing countries. First, we exploit recent tax reforms to credibly estimate the elasticity of income to changes in marginal tax rates from a taxpayer panel with state-of-the-art methods, a novelty in the context of Sub-Saharan Africa. We find a value of 0.3 for our sample of ‘middle-class’ individuals, which conceals large disparities between inelastic public workers and a rather elastic private sector. Second, we combine administrative tax data with household survey data to properly measure income inequality and assess the success of income taxes and potential reforms in reducing it. We also triangulate these data sources to quantify the compliance gap at 23% of potential revenue, mainly attributable to self-employed workers. Finally, we rely on these tools to investigate the trade-offs faced by Kenyan policymakers.

We develop a theory of tax reforms for a setting with multi-dimensional heterogeneity amongst taxpayers and multiple economic decisions that are all subject to fixed and variable costs. The theorems in this paper provide a complete characterization of the conditions under which Paretoor welfare-improving tax reforms exist. We focus on one application, the taxation of couples, and present a detailed analysis of the behavioral responses to taxation in this setting. Squaring the theorems with this analysis yields sufficient statistics for the existence of Pareto- or welfareimproving tax reforms. In the empirical part, we apply them to US data. Our findings include the following: Tax rates on secondary earnings are inefficiently high when secondary earnings are close to primary earnings. Also, reducing the tax system’s degree of jointness is not Paretoimproving. Whether it raises welfare depends on a trade-off between poverty alleviation and gender balance.

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 electronic methods. Using a difference-in-differences approach based on pre-reform sector-level cash intensity, 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, offsetting the revenue gains from improved payroll tax compliance.

We investigate the behavioral response of workers to total marginal taxes (i.e., income taxation and social-security contribution) and discounted marginal pension benefits. Our contributions are threefold. We extend the Saez (2010)-Chetty et al. (2011) framework to: compute the effective marginal tax-benefit rate, which decreases as the worker approaches retirement; show that informality fosters bunching at kinks of the tax schedule, which brings to larger estimates of the elasticity of the formal labor income. Second, we leverage administrative matched employer-employee data to test formal wage earners’ earnings elasticity for changes in effective marginal tax-benefit rates. Third, we find that workers bunch only at the kink determined by pension-benefit cap. Moreover, bunching grows in workers’ age, and the effect is significantly stronger for small firms under the Brazilian simplified tax regime. The latter result highlights the importance of the degree of informality (e.g., of firms, sectors) to explain bunching at kinks.

We explore the effects of a minimum wage hike in 2018 and an upward revision in the first kink in the progressive income tax schedule in 2017 in Zambia, to compare their impacts on wages in both the formal and informal sectors. We show that the minimum wage effects spill over into the informal sector despite being targeted at the formal sector. We propose and show a new lighthouse effect, where tax kinks are a reference point for wage setting in the uncovered informal sector. Results show that the minimum wage increases informal wages by 0.4%. Additionally, a hike in the first tax kink produces similar distributional effects and reduces real wages just above the revised kink of both formal and informal workers. With the informal sector’s persistence on new bunchers driving our results, we confirm that the new lighthouse effect is relevant in the case of a developing country.

We study the dynamics of formal employment, using matched employer-employee panels from ten countries at different income levels, and from across states in Brazil and Colombia. We show that increases in formality rates with development are driven by the extensive rather than the intensive margin of formal employment. Countries and regions with higher formality exhibit a higher rate of job-to-job switches and higher returns to tenure. As a result, formal workers in these regions experience higher life-cycle wage growth.

This study estimates non-take-up rates for three German means-tested benefits and examines their determinants. While prior research has largely focused on basic income support, less is known about housing allowance (“Wohngeld”) and supplementary child benefits (“Kinderzuschlag”), despite their rising importance and related nature. Employing a microsimulation model based on official Mikrozensus data that replicates the German tax and benefit system, the analysis reveals higher non-take-up rates for housing allowance and supplementary child benefits compared to basic income support. Moreover, cross-benefit analysis indicates that participation in one scheme may affect engagement in others, while regression results offer novel insights into access barriers.

Understanding how divorce affects earnings is crucial for designing effective policies that promote financial stability. This paper investigates earnings responses to divorce and the mechanisms driving these changes, utilizing extensive pension and income tax data. Event study results reveal significant differences in earnings reactions on both the extensive and intensive margins between women and men. However, most of the gender disparity is driven by women being the secondary earner more frequently. To explore the mechanisms behind these patterns, I draw on a household model framework to highlight key changes in disposable income during the transition from marriage to divorce and analyze them using data on the universe of divorced tax filers. Leveraging variations in disposable income changes, the empirical analysis first examines the roles of relative and absolute income levels at the time of divorce. Second, variation in tax schedules and alimony payments is used to isolate policy impacts.

This paper examines the impact of Japan’s consumption taxes on the income distribution from 1989 to 2014. Using micro-level data from the National Survey of Family Income and Expenditure (NFSIE), we apply statutory tax rates to calculate exact consumption tax burdens for each household and measure its redistributive effect by Reynolds-Smolensky index. The results suggest that consumption taxes in Japan are regressive and thus increasingly offset the redistribution efforts made by income taxes. The fixed income and consumption approach further confirms that changes in household spending and saving patterns have magnified this anti-redistributive effect. The findings underscore the need for targeted policy measures to reduce the burden on low-income groups.

Behavioral microsimulation models can be used to supplement results from non-behavioral tax-benefit models in policy-making. However, the policy analyst may not always have access to a fully developed behavioral simulation model for the policy issue in question. Here we draw attention to an alternative, which implies describing behavioral effects by using response estimates from other studies. We refer to this approach as “using external evidence”. We illustrate how tax revenue and distributional effect estimates can be derived by integrating external tax elasticity estimates into a non-behavioral tax-benefit model. The framework is illustrated using two examples from Norwegian tax policy.

When nearby regions have different tax rates, residents may travel to shop in the lower tax rate region. The extent of this activity is captured by the tax elasticity of border sales (TEBS). We collect 749 estimates of TEBS reported in 60 studies, and conduct the first meta-analysis of this literature. We show that the literature is prone to selective reporting: positive estimates are systematically discarded. Sales of food, retail and fuel are more elastic compared to sales of tobacco and other individual ‘sin’ products. Cross-border shopping is more prominent in the US—compared to Europe and other countries.

The relationship between taxation and trade is complex, with far-reaching implications. This paper explores strategies to support tax administration in West Africa. By combining micro and macro data, we found that trade integration can impact tax revenue, consistent with existing economic integration literature. However, our analysis also revealed weak institutional collaboration in managing trade-tax complexities. Notably, domestic tax departments in sampled West African countries showed limited understanding of the African Continental Free Trade Area (AfCFTA), whereas customs departments demonstrated greater awareness and capacity. To address these challenges, capacity-building strategies for revenue and trade officials should include training on optimal tax and trade policy design.

This paper examines the macroeconomic and welfare impacts of various tariff scenarios using a four-region dynamic general equilibrium model with a multi-sectoral production network. The scenarios include unilateral US tariffs, coordinated US-EU tariffs, Chinese retaliation, Europe's non-participation, and sector-specific versus broad tariffs.

Our results show that tariffs initially boost domestic output by making local goods cheaper. While consumption increases permanently, the output benefits are short-lived. Increased production costs and reduced global income negate the output gains over time. China has an incentive to retaliate and when it does so, welfare losses deepen for the affected partners. Additionally, the rest of the world suffers from reduced aggregate income regardless of direct involvement in tariff conflicts. Sector-specific tariffs are found to be less effective than broad tariffs by failing to protect non-targeted industries. Overall, tariffs appear inefficient for economic protection due to the high possibility of retaliation.

The European Union’s sanctions against Russia following the Ukraine invasion have reshaped global trade dynamics. While direct effects on sanctioning and sanctioned countries are intuitive, little is known about the effects on neutral third-party nations like South Africa. This study examines trade diversion and round-tripping of sanctioned products to and through South Africa using detailed administrative trade data. Moreover, we explore the effects of such trade at the firm and worker level via linked employer-employee data. Using a series of event studies, we analyze monthly transaction-level 6-digit product-level trade flows, revealing shifts in import and export patterns in South Africa and direct and indirect sanction parties.

This paper extends the forward-looking effective tax rates of Devereux and Griffith (1998) to model targeted tax reforms and anti-avoidance measures. To implement tax reforms or tax measures which depend on firm-characteristics the effective tax rates are calculated using firm characteristics

like in Egger et al. (2009). The propsed extensions aim to model interest barriers, thin capitalisation and CFC rules as well as considering loss consoldiation and loss carry forward. Comparing the results to the standard bilateral effective tax rates shows that considering firm-variation can substantially alter the ranking of the bilateral tax burden.

This paper investigates how multinational enterprises (MNEs) strategically reallocate risk among their affiliates in response to the introduction of transfer pricing regulations, using the implementation of transfer pricing documentation rules in France in 2010 as a quasi-natural experiment. Using administrative data, we examine the shifting of several risk types outlined in the OECD Transfer Pricing Guidelines, including market risk, credit risk, inventory risk, and R&D risk. Our analyses suggest that affected MNEs allocate less market and credit risk to French affiliates after the reform. As risk allocation goes hand in hand with shifting of real activity, we subsequently assess the impact of the French transfer pricing reform on MNEs’ investment and employment decisions. Our study provides insights into the effectiveness of transfer pricing regulations and sheds light on how MNEs adapt their corporate structures to facilitate profit shifting through transfer pricing mechanisms.

Using a stacked difference-in-differences design, we look into the investment, trade and profit shifting responses of MNEs on DDT arbitration clauses. Based on bilateral data on FDI and trade flows and MNE financials, we find that the introduction of an arbitration clause in existing DTTs has, on average, no significant impact on FDI across countries. In contrast, the effect of the introduction of an arbitration clause on bilateral service flows is positive and significant. The value of bilateral flows for services is even higher if the tax rate differential comes with a tax benefit or reduces a tax disadvantage. Both indicates profit shifting by way of transfer pricing. Profit shifting is corroborated by the fact that the profitability difference between service provider and recipient increases for services to affiliates that are subject to a lower tax burden than the provider.