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 paper estimates the elasticity of taxable income (ETI) for the highest 1% labour-income earning individuals, utilizing a change in taxation in 2013, when a new top tax bracket was added to the earned income tax schedule in Finland. There are not many estimates for the top income elasticity in the literature, even though their response is crucial in determining the income-maximizing level of top income taxation. This study contributes to the top income ETI literature by employing a triple-differences method comparing changes in income within the same income groups for different time periods. The results suggest that the ETI for top earners (0.5) may be higher than found 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 had 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 personal income taxes in reducing it under the current structure and several potential reforms. We also combine these data sources to quantify the compliance gap at around 20% to 25% of potential revenue, mainly attributable to self-employed workers.

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.

Despite a well documented signaling and status motive behind higher education, the implications thereof for optimal redistributive taxation remain largely unknown. This paper deals with education policy in a very general continuous type model of optimal redistributive taxation, in which individuals are concerned with their relative standing in both education and consumption. We show how concerns for relative education may reduce the optimal marginal eduction subsidies subsantially, as well as how these marginal subsidies relate to the marginal income tax structure. More specifically, we illustrate when optimal eduction subsidies contribute to decrease versus increase consumption inequality.

We follow high school graduates through college and the labor market to study income segregation and intergenerational mobility across colleges in Brazil, a unique context where admissions are mostly determined by exam scores and public institutions are free and of high quality. We show that public college admissions are income neutral once controlling for grades, but elite public colleges are composed mostly of higher-income students, as they have higher exam scores. Intergenerational mobility rates in elite public colleges are low, but higher than in comparable private institutions. We develop a general framework to evaluate affirmative action in public colleges and subsidized loans for private institutions. Both policies increased the mobility of low-income students, but subsidized loans have a larger effect. While AA increases the representation of disadvantaged students in elite schools and subsidized loans do not, the latter policy reallocates an overall larger number of students to better college tiers.

Educational and labor market outcomes are influenced not only by academic ability but also by a student’s relative rank among peers—a phenomenon known as the “big fish, little pond effect” (BFLPE). Using linked administrative data from British Columbia’s Elementary and Labour Market Longitudinal Panel (ELMLP), we track students from elementary school through adulthood to examine the effects of rank in grade 7 on long-term outcomes. We find that higher math rank significantly increases income relative to the median, with top-ranked students earning up to 5% more and lower-ranked students earning up to 7% less. In contrast, reading rank has no effect on income but influences educational attainment. These findings suggest that rank plays a key role in shaping success. Our results have implications for education policy, highlighting the need for targeted interventions to support lower-ranked students and the importance of fostering quantitative skills for long-term economic benefits.

In this paper, a multilevel analysis is applied to the OECD-PISA 2018 data for Greece with the aim to identify the multiple mechanisms that produce adverse child outcomes, at least as captured by poor school performance. At the student level, gender, immigration status, early-childhood education attendance and the cultural aspects of family socioeconomic status play an important role. At the school level, the private-public divide seems to be the strongest favoring private schools. Its direction is however reversed once school mean family socioeconomic background is taken into account, suggesting that the way students and schools are matched affects how family background effects are reproduced. Educational inequalities are further compounded in upper secondary education where differences in family investment in private education and tutoring are huge among children of unequal economic status. The paper provides important insights for policymakers in order for society to tackle inequalities and properly invest in its human capital potential.

Size-based regulations and taxation are ubiquitous. In this paper, we examine the impact of size-based taxation on firm growth by exploiting a large and permanent tax reform from Pakistan, where the VAT threshold was raised from PKR 5 million to PKR 10 million. Using a difference-in-differences framework and rich administrative data, we estimate the causal effects of this reform on firms whose growth was previously constrained by the size threshold. Our findings reveal substantial growth effects: treated firms saw their revenue increase by 32 log-points, costs by 19 log-points, and gross profits by 13 log-points. These effects are driven by real economic activity, as third-party reported outcomes, such as wages and imported inputs, also grew by similar margins. Treated firms paid higher taxes across various measures, highlighting their strong willingness to pay to get rid of the size-based taxation.

Value-added tax is commonly the most important source of tax revenue for governments in developing countries but little is currently understood about how firms respond to the tax. Using administrative tax data from West Bengal in India, we study the behavioural response induced by a turnover threshold for compulsory VAT registration. Exploiting variation in the tax discontinuity at the registration threshold across firms and over time, we show that it is tax liabilities rather than compliance costs that explain the bunching of firms below this threshold, and the associated revealed preference for a simplified tax scheme. The limited role for VAT compliance costs in business decisions has important implications for the welfare gains from the tax and for the optimal level of VAT registration thresholds.

This paper examines how small and medium-sized businesses respond to a size-based tax and reporting threshold in the German local business tax. Using novel administrative tax return data covering the vast majority of German businesses, we document significant bunching at the tax allowance threshold while reporting requirements play a minor role. Following a cohort-based difference-in-differences approach we show how businesses manage their profits to stay below the tax allowance threshold. The bunching response is driven by a reduction in reported revenue and an increase in costs with some expenditure items potentially reflecting private consumption channeled through the firm.

How do tax enforcement interventions diffuse through firm-to-firm networks? We explore this question with a randomized trial in Uganda. Using transaction-level VAT data, we map seller-buyer networks and identify discrepancies in the amounts reported by trading partners. Enforcement letters highlighting these discrepancies are sent to either the seller, the buyer, or both. The correction rate in the treatment group is 23.8%, fourteen times higher than in the control group. This response is asymmetric: corrections are primarily made by sellers, even when only buyers receive letters, providing novel evidence that firms can induce changes in their partners’ tax reporting. Spillover effects extend to transactions not listed in the letters, including those involving other trading partners. The intervention also results in sustained improvements in reporting behavior over subsequent months. Our study sheds light on firm-to-firm communication within networks and offers policy-relevant insights for fighting tax evasion.

The spatial configuration of domestic supply chains plays a crucial role in the transmission of shocks. This paper investigates the representativeness of formal firm-to-firm trade data in capturing domestic trade patterns in Kenya — a context with a high prevalence of informality. We first document a series of stylized facts to show that formal sector data is not representative of overall economic activity. We then link granular transaction-level data on formal firms with data on informal economic activity to estimate a structural model and predict a revised network that accounts for informal firms. We find that formal sector data overstates the spatial concentration of aggregate trade flows and underaccounts for trade within regions and across regions with stronger social ties. Additionally, the higher the incidence of informality in a sector and region, the more we underestimate its vulnerability to domestic output shocks and overestimate its vulnerability to import shocks.

This paper presents findings from a field experiment assessing the impact of increased tax officer presence on tax compliance and morale among SMEs in Tanzania. The experiment was embedded in a face-to-face survey, where Tanzania Revenue Authority officers accompanied an independent survey firm in randomly selected urban and peri-urban wards. This temporary increase in tax officer visibility aimed to test whether their presence influenced taxpayer behavior. Results indicate no significant overall effect on tax compliance or tax morale, as measured through administrative and survey data. However, a short-term rise in compliance was observed in Tanzania’s largest city, while tax morale showed a sustained increase elsewhere. A follow-up survey suggests that these effects stemmed from heightened perceptions of enforcement credibility rather than improved perceptions of tax facilitation or trust in the tax authority.

This paper provides novel evidence of the trade-offs policy makers face between revenue collection, simplicity, and equity when designing simplified tax regimes for small businesses in low-capacity settings. First, it provides a comprehensive stocktaking of the main features of these regimes across Sub-Saharan Africa. Second, it draws on administrative and survey data from Kenya for a thorough examination of its simplified tax regime. This analysis shows most small businesses lack knowledge about design features, such as the existence of a minimum exemption threshold. Finally, the paper presents the results of an experiment that encourages taxpayers to pay customized fixed amounts - a potential alternative design of a simplified tax regime that aims for a better balance of the trade-offs facing policy makers. The findings show that providing simple guidance about how much small businesses with similar characteristics typically pay in taxes can increase revenue, but at the expense of equity.

This study examines behavioral responses to Rwanda's presumptive tax regime for small businesses, with a focus on gender differences in taxpayer behavior. While simplified tax regimes aim to raise revenue, encourage formalization, and reduce compliance costs, there is limited empirical evidence on their effectiveness. In particular, simplified tax regimes may encourage behavioral responses that run counter to its goals, with taxpayers minimizing tax liabilities by strategically reporting income below tax thresholds. Using administrative tax data from 2012 to 2022, we present three sets of stylized facts to answer the following questions: 1) What are the characteristics of taxpayers in the presumptive tax system? 2) Are there behavioral responses to the presumptive tax system, and if so, are there important gender differences? and 3) What proportion of businesses graduate to the regular tax system and what are their characteristics? Are women-owned businesses less likely to graduate?

The link between state history and contemporary economic outcomes, like development and governance, is well established, but the effect of state antiquity on fiscal capacity remains underexplored. This study examines whether longer historical experience with state-level institutions improves tax collection capabilities. Using data from 159 countries, we find that accumulated statehood experience positively impacts fiscal capacity. This relationship is robust across alternative measures of state antiquity and fiscal capacity, controls for standard fiscal capacity determinants, and considerations of heterogeneity. It also holds after addressing endogeneity concerns, including measurement errors and omitted variables. Our analysis reveals two key mechanisms through which state antiquity enhances fiscal capacity: fostering economic development and improving governance quality. Notably, it strengthens corruption control, government efficiency, and the rule of law. These findings highlight the enduring influence of historical statehood on modern fiscal capacity and its transmission through institutional and economic pathways.

We study the transition of sub-national fiscal multipliers’ efficiency in normal times across the structural characteristics’ threshold levels in the Indian states. Using the recently developed Panel Structural Threshold Regression Model, we identify latent groups across the states contingent on their structural characteristics. Our findings suggest that for Indian States capital outlay expenditure multipliers are higher than revenue and aggregate spending multipliers. We identify financial inclusion as one of the important state-level fiscal multiplier determinants. Our results suggest that state public debt has negative implications for all the categories of fiscal multipliers and across all the latent groups. Based on our study, we argue for a sustainable policy-oriented targeting framework, which includes threshold levels for public debt accretion as a sub-target.

Women in East Africa are enormously underrepresented in government with no more than one in every five cabinet positions being occupied by women. Women in cabinet are also less likely to hold high-prestige cabinet positions. This has ramifications on the implementation of policies that raise the living standards among the poorest segment of the population. This paper analyzes the extent to which gender inclusive cabinets foster pro-poor growth. We utilize the Who Governs dataset alongside the Worldwide Governance Indicators, and the World Income Inequality datasets in a regression discontinuity design setup. Results indicate that raising the share of women in cabinet above designated thresholds insignificantly affects the distribution of average pre-tax national incomes among the poorest half relative to the top income decile. These results hint at the low prestige positions held by the underrepresented women in cabinet.

How, and to what extent do tax policymaking processes impact tax revenue performance? This study assesses the effects of political institutions on tax systems in Africa to identify actionable strategies to enhance domestic revenue mobilisation in the region. Using a combination of quantitative and textual data, the main finding is that democratic accountability and practice show surprisingly less marked effects on tax systems in West Africa, particularly after controlling for basic tax handles that may moderate the probable interactions between institutions and tax administration. Also, results show that trade/labour unions have strong potential to influence tax system outcomes in the long run