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 supervisory approval in the budgeting process when facing fiscal imbalances. Using an event-study design with staggered treatment adoption, we find that municipalities increase local tax rates on property and business profits, but only property tax hikes translate into higher revenues. Additional revenue gains arise through higher transfers from the state via the fiscal equalization system. Beyond the core budget, we document a novel adjustment margin: net expenditures for enterprises under municipal control rise following supervision. These results suggest that extended fiscal oversight affects not only municipal budgetary decisions but also the financial behavior of municipally owned enterprises.

This study assesses the sustainability and threshold levels of public debt in India’s federal system using data from 1990-91 to 2024-25, applying fiscal policy response functions and threshold regression. The results indicate that central government debt is weakly sustainable with a threshold of 52.16%, while state government debt is strongly sustainable with a threshold of 22.24%. As current debt levels constrain growth, fiscal discipline is crucial. Debt simulations suggest that maintaining 12% nominal GDP growth and a fiscal deficit of 3% for the Centre and flexible, state-specific targets averaging 2.5% from 2025-26 onwards would ensure sustainability. Under these conditions, the Centre could meet its target before the Viksit Bharat 2047 deadline and support States through on-lending, low-interest loans, targeted grants, or debt consolidation, without undermining development priorities. The study also underscores the need for revenue augmentation and rationalised spending, particularly by cutting unproductive subsidies, to safeguard 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.

In 2019, almost 100 local governments in Poland voted to declare their localities “free from LGBTQ ideology,” providing a unique setting in which government narratives suddenly changed, but the legal situation of targeted minorities remained the same. We study the impact of these resolutions on migration intentions using novel 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. The shock to beliefs about local social norms likely drives our results, as we find the largest effects in counties with relatively low prior support for far-right parties. We also present suggestive evidence that the rise in job search translated into actual migration, with the treated counties losing nearly one percent of their young adult population.

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 in Patagonia, Argentina, implemented to correct a distortion from national income tax policy interacting with regional labor institutions. Using employer-employee panel data and firm-level analysis, I examine the policy's effects on wages and the spatial reallocation of workers and firms. While aggregate worker migration does not increase, the policy creates opposing wage effects: the premium rises for workers moving to Patagonia but falls for those switching jobs within the region. Firm-level analysis shows evidence of spatial reallocation, with accelerated growth among firms operating across both regions. These findings reveal a segmented labor market with opposing wage effects, a pattern difficult to reconcile with simple competitive models and points toward the importance of bargaining dynamics and firm heterogeneity.

Refugees’ decisions about returning are of great importance to both their origin and host countries. We examine whether geopolitical factors and international alliances directly influence return decisions. To derive causal estimates of how the post-war security situation and economic prospects affect return decisions, we conducted a conjoint experiment among Ukrainian refugees in 30 European countries. In the experiment, respondents were asked how likely they are to return to Ukraine under different scenarios. Territorial integrity and security guarantees are crucial, but economic prospects and combating corruption also play an important role. We estimate that, in the most optimistic scenario, half of Ukrainian refugees expect to return, while,

in the most pessimistic scenario, only 3% expect to return.

This paper provides evidence that asset testing of social transfers substantially depresses the liquid wealth of the poor. Using administrative data on income and wealth for the full population, we estimate the effects of the asset test for an old-age support program in Denmark. We document that the density distribution of liquid wealth exhibits large but diffuse excess mass below the threshold for the low-income elderly relative to control groups of comparable but ineligible individuals. Analyzing high-frequency bank data on assets, spending and cash withdrawals shows that the excess mass largely reflects permanently lower liquid wealth rather than temporary responses.

In this paper, we introduce novel estimates of wealth inequality, integrating the standard household wealth concept with newly assessed individual human capital. Using microdata and national accounts from numerous countries since 1979, we explore the distribution across age, gender, education, and occupation. Our analysis reveals two key findings: human capital is more evenly distributed than financial capital, and total wealth, the sum of human and financial capital, is significantly more equal than financial wealth alone. This study offers a groundbreaking perspective on global wealth dynamics, emphasizing the critical, yet often overlooked, role of human capital in wealth distribution.

The concentration of wealth among the ultra-rich has renewed debates over using wealth taxes to reduce inequality and finance public investments. Traditional measures based on tax records and surveys understate top wealth due to offshore assets, complex holdings, and underreporting. We address this by combining extrapolations from the Wealth Inequality Database (WID) with real-time Forbes billionaire rankings, thereby recalibrating estimates to better capture ultra-wealth. Using Spain’s progressive wealth tax framework as an empirical benchmark, our analysis indicates that a 1.7–3.5% tax on net wealth above the top 0.5% threshold could generate approximately $2.3 trillion annually—roughly 8% of global central government revenues. We also address concerns about behavioral responses; even under scenarios such as billionaire migration, estimated revenues remain robust at $2.2 trillion (7.7% of revenues). Our findings suggest that wealth taxes offer a promising tool to mitigate inequality and fund critical public priorities.

We conduct a comprehensive empirical investigation of the link between inequality and financial openness. We document that the relationship varies considerably not only over time, but also across the main components of total external liabilities, which have been largely overlooked by the existing literature. In emerging market economies (EMEs), an increase in a country’s external liabilities is associated with an initial rise and a subsequent fall in inequality. This appears to be driven by the fact that the channels through which financial openness increases inequality tend to be active immediately, while the inequality-decreasing channels tend to operate with a lag. The link between financial openness and inequality tends to be substantially weaker in advanced economies than in EMEs.

Empirical evidence suggests that social acceptance of redistribution depends on whether income differences result from individual responsibilities or from circumstances. Acceptance is limited when differences stem from preferences, but greater when they result from circumstances. We propose a method based on compensating variation (CV) that accounts for this distinction in order to assess the distributional effects of a tax reform. It relies on estimation of a structural labor supply model which allows us to neutralize preference heterogeneity. We apply our method to evaluate the welfare effects of changes in labor income taxation introduced by the Norwegian tax reform of 2013–2019. We find that the estimated measure of CV when preference heterogeneity is neutralized displays distributional effects that are very similar to those observed with the measure of CV with heterogeneous individual preferences, themselves being very similar to those observed with the well-known CE criterion.

Nordic countries have been exceptional in their ability to combine equality and strong social protection with high taxes and dynamic economies. This paper studies the long-term evolution of Nordic tax-bene t policies and the Nordic model. We include the behavioral employment effects of tax-bene t changes by estimating participation elasticities. There has been a tendency to aim at efficiency over equality in the labor market. The employment effects of lower taxes and benefits do not o -set the increased inequality. The results show weakening social protection in Nordic countries.

Adam Smith considered a tax on income to be an ideal form of raising revenue that was administratively impossible. What changed? I study the intellectual history of the income concept and suggest hypotheses for when and why income became an administratively feasible tax base that was legible to the taxing state. I suggest a role for the rise of new accounting technology and the rise of wage earners---both connected the rise of the firm.

Taxation based on identity has a long, sordid history, and persists to this day, usually in implicit ways. It is a relatively tame cousin of the blatant, violent, and genocidal policies that have targeted people of certain religions, races, and genders for millennia. Tax based on identity is difficult, although not impossible, to justify within standard optimal tax analysis, because in that framework the policy objective is usually framed as being anonymous (impartial) and eschews basing policy on disparate preferences. The most promising justification seems to be if, for example, race is systematically correlated with the failure of income to represent ability to pay. It then acts as a tag that can help achieve the desired allocation of tax burden at minimal efficiency cost. For unjustified identity-based tax policy, analysis can help to spot its existence and quantify its welfare cost.

The Condorcet paradox has been a significant focus of investigation since Kenneth Arrow rediscovered its importance for economic theory. Recent research on this phenomenon has oscillated between simulation studies, probability calculations based on hypothetical voter preferences, and empirical analyses often limited by unsatisfactory data. This paper presents the first comprehensive evaluation of 253 electoral polls conducted across 59 countries. Our findings demonstrate that the Condorcet paradox has virtually no empirical relevance: with only one exception, we find no evidence of cyclical majorities in any of the 253 elections. This result remains robust after statistical inference testing. Furthermore, this study provides insights into which parties are particularly likely to emerge as Condorcet winners and explores how these Condorcet winners assert themselves after elections.

While consumer sentiment is a key macroeconomic indicator tied to employment and inflation, its response to targeted government policies remains less understood. This study addresses that gap by examining the causal link between fiscal interventions and household confidence, using the 2021 Child Tax Credit (CTC) expansion as a natural experiment. The CTC provided monthly payments that lifted incomes—particularly for lower-income families—until it abruptly expired in early 2022. Drawing on microdata from the University of Michigan’s Consumer Sentiment Survey, we show that removing this crucial support triggered a pronounced drop in economic confidence, most severe among lower-income households and those with multiple children. In contrast, higher-income families saw no substantial change in sentiment. Our findings demonstrate that government policies like the CTC can have significant effects on consumer sentiment, underscoring their vital role for vulnerable populations who rely heavily on such financial support to maintain economic stability.

This study explored how financial access, tax perceptions, parental behaviors, and gambling activity influenced gambling propensity, intensity, and related financial outcomes, including indebtedness, among low-income individuals in Kenya. Utilizing a cross-sectional Financial Access dataset (2024) by Financial Deepening Sector (FSD), Kenya National Bureau of Statistics, and Central Bank of Kenya, Logistic, Ordered Probit, and Multinomial Logit regressions analyzed these relationships. Findings reveal parental gambling history significantly increased gambling propensity, while mobile money and formal credit access facilitated higher gambling intensity. Crucially, both gambling propensity and intensity significantly heightened "missed," "less," and "late" loan payments, strongly supporting the "no-profitability" hypothesis. Formal credit access emerged as a "double-edged sword," though financial literacy was protective and positive tax perception showed only minor impact. This research contributes granular empirical insights into gambling-to-debt pathways in a low-income Kenyan context. Policy recommendations include progressive gambling taxation and hypothecating revenues for financial literacy and debt counseling programs.

We conduct a randomized experiment comparing individual- and team-based performance pay among credit officers at a microfinance institution in Uganda. We find that tying rewards to individual or team performance has no significant effect on job performance (loan outcomes). However, turnover is substantially higher under individual incentives, with twice as many employees leaving compared to the team-based scheme. Survey data also reveals lower job and workplace satisfaction under individual incentives. Importantly, when individual incentives are combined with a portfolio rotation policy — which more equitably distributes opportunities for bonuses — the negative effect on turnover is mitigated. These results highlight the risks of individual incentive pay, which can reduce satisfaction and increase turnover. Introducing complementary policies like portfolio rotation can help address these unintended consequences and support better retention under individual-based incentive systems.

For low-income countries looking to enhance revenue mobilisation without harming firm growth, understanding the full burden of taxation, beyond just tax liabilities, is crucial. This paper documents the substantial and often regressive tax compliance costs faced by small and medium-sized firms in Uganda. Using original survey data from nearly 2,000 firms, matched to administrative tax data, I show that compliance costs are significant, equivalent to 2% of turnover for the median firm. Moreover, total compliance costs often exceed firms' tax liabilities. Breaking down cost components, I find that labour time spent on tax compliance activities is the largest component, with tax compliance consuming a median of 34 hours of labour time per month, and approximately 20% of firm owners' working hours. Using a survey experiment, I test how sensitive compliance costs measures are to the measurement strategy, finding significant divergence between estimates from an itemised module versus more aggregate questions.

Low-income countries face the combined challenges of climate shocks and limited domestic revenue mobilization, yet these issues are rarely studied together. This paper provides new evidence on the impact of climate shocks on firm performance and tax revenue in a low income country context, using firm-level data from Zambia. We find that extreme weather events, such as excessive rainfall and high temperatures, significantly reduce firms’ sales, input purchases, and tax collection, particularly in sectors such as manufacturing, retail, accommodation, and construction. Firms respond by reducing employment and wages, reflecting a decline in productivity.

Value Added Tax (VAT) collection is essential for achieving domestic revenue objectives. Yet, the extent of misreporting, or the VAT gap, is infrequently and unsystematically evaluated in developing countries, where it would be most beneficial. This study utilizes VAT declaration and audit data to estimate VAT misreporting in Rwanda, applying a machine learning approach to predict evasion in unaudited firms and periods. We measure the underreporting component of the compliance gap, quantifying potential revenue losses due to non-compliance. We estimate a 62 per cent VAT gap among all VAT-reporting enterprises in Rwanda. The Manufacturing and Wholesale and retail sectors have the highest VAT gaps.