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on Public Economics |
| By: | Brad C. Nathan; Ricardo Perez-Truglia; Alejandro Zentner |
| Abstract: | We provide evidence on the role of fairness for tax compliance: households are willing to pay more in taxes if they believe that other households are contributing their fair share. We conducted an information-disclosure natural field experiment in the context of property taxes in the United States. We induced exogenous shocks to households' perceptions about the average tax rate paid by other households. We find that a higher perceived average tax rate decreases the probability of filing a tax appeal. Translating our estimates into a money metric, we find that for each additional $1 contributed by the average household, a taxpayer is willing to pay an extra $0.43 in his or her own taxes. |
| JEL: | C93 H4 H70 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32588&r= |
| By: | Christopher Axelson; Antonia Hohmann; Jukka Pirttilä; Roxanne Raabe; Nadine Riedel |
| Abstract: | Rising levels of income inequality and tight government budgets have spurred discussions in many developing nations about how to appropriately tax high-income earners. In this paper, we study taxpayer responses to an increase in the top marginal tax rate in South Africa, drawing on exceptionally rich tax administrative data and a transparent empirical identification design. We establish that treated taxpayers strongly reduce their reported taxable income in response to the tax reform. Taxpayers' responses are driven by both reductions in broad income and increases in tax deductions. |
| Keywords: | Income inequality, Taxable income, South Africa, Tax reform, Top incomes |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2024-37&r= |
| By: | Bosco, Bruno; Bosco, Carlo Federico; Maranzano, Paolo |
| Abstract: | This paper uses the Italian income tax treatment of 2006/7 as a quasi-natural tax experiment to offer some fresh empirical evidence on how labour supply responds to exogenous income tax hikes. We adopt the identification strategy based on TWFE panel data Difference-in-Differences (DID) model to define the correct statistical framework of the study, and to benefit from the specific features of the above tax experiment, namely homogeneity and contemporaneity of the treatment. Results show that the extensive negative adjustments of various response variables measuring the supply of labour services offered by treated taxpayers are statistically significant, rapid, and strong but not long-time lasting. Not surprisingly, we also find that that treated families reduce in a similar manner their consumption with respect to families in the control groups. Analogous adjustment responses to tax hikes characterise the growth of per-capita regional GDP. The estimated aggregate effects of tax hikes are further compared with the spatial-temporal patterns observed for every response variable in treated and untreated regions. |
| Keywords: | Public Economics |
| Date: | 2024–06–27 |
| URL: | https://d.repec.org/n?u=RePEc:ags:feemwp:343514&r= |
| By: | David Koll; Dominik Sachs; Fabian Stürmer-Heiber; Hélène Turon |
| Abstract: | We formalize and estimate the dynamic marginal efficiency cost of redistribution (MECR) in the spirit of Okun’s “leaky bucket” to compare the MECR of an income-contingent childcare subsidy program and of the income-contingent tax and transfer schedule. We set up a dynamic structural model of heterogeneous households choosing their childcare demand and maternal labor supply. Allowing for the availability of informal childcare and for consumption of leisure, we estimate this model within the German context. Our analysis identifies two competing forces. (i) Labor supply responses increase the MECR of the childcare subsidy relative to the tax and transfer system. (ii) Child development effects decrease the MECR of the childcare subsidy relative to the income tax. We show that, under most plausible assumptions on the long-term returns to childcare attendance for children growing up in households of different incomes, progressive childcare subsidies are the more efficient redistribution tool. |
| Keywords: | Female Labor Supply, Childcare, Family Policies, Fiscal Externalities, Dynamic Discrete Choice, Redistribution |
| JEL: | H23 H31 J13 J22 J24 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_570&r= |
| By: | Friberg, Richard (Dept. of Economics, Stockholm School of Economics); Steen, Frode (Dept. of Economics, Norwegian School of Economics and Business Administration); Ulsaker, Simen Aardal (Dept. of Economics, Norwegian School of Economics and Business Administration) |
| Abstract: | We use COVID-19 border closings and comprehensive store-level data on Norwegian alcohol sales to quantify the effect cross-border shopping of alcohol on sales volume and commodity tax revenue. Effects are large, for instance we estimate that commodity tax revenue for wine is about 20% lower because of cross-border shopping. Using product level data we establish that effects come from across all products rather than just a few, but effects are especially marked for bag-in-box wines. Neither availability of the exact same product in Sweden nor idiosyncratic product-level price difference with respect to Sweden has any marked effect on the impact of cross-border shopping on sales. |
| Keywords: | Cross-border shopping; Commodity taxes; Excise taxes; Tax Competition |
| JEL: | D62 F15 H20 |
| Date: | 2024–07–04 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:nhheco:2024_012&r= |
| By: | Anna Aizer; Adriana Lleras-Muney; Katherine Michelmore |
| Abstract: | Child poverty fell to historic lows in 2021, in large part due to the temporary expansion of the Child Tax Credit (CTC). We consider the possible implications of this expansion on children’s short- and long-term development. To do so, we review the available short-run evidence from the 2021 expansion and the existing research evidence on the longer run effects of similar income transfers in childhood on child health and human capital. We conclude that the CTC likely improved child health and well-being in the short and long run, with greater impacts for poor children and modest or nonexistent effects for non-poor children. Moreover, the effects might be more substantial for younger children and for those in places with weaker safety nets. |
| JEL: | I24 I30 J38 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32609&r= |
| By: | Demetrio Guzzardi (Institute of Economics and EMbeDS, Scuola Superiore Sant’Anna); Salvatore Morelli (University of Roma Tre, Stone Center on Socio-Economic Inequality, GC-CUNY, and CSEF) |
| Abstract: | Detailed distributional estimates at finer geographical levels remain scarce, despite their critical relevance for household well being and policy intervention. This paper leverages Italian income tax records dating back to 1976 focusing on top income concentration and inequality across the country’s regions, macro-areas, and the recently introduced classification of the National Strategy for Inner Areas (SNAI). Our analysis reveals a persistent rise in income concentration over the past few decades, particularly among the top earners, while also highlighting nuanced regional and sub-regional dynamics. Notably, city size plays a crucial role, with larger cities experiencing a more pronounced level of income concentration compared to smaller ones. Southern regions exhibit lower income concentration levels among the top income groups, emphasizing the need for disaggregated analyses to capture these complexities accurately. |
| Keywords: | Income Inequality; Top Income Shares; Italy; Inner Areas; Spatial Inequality; Income Tax Data; National Accounts. |
| JEL: | D31 H20 J3 R1 |
| Date: | 2024–06–12 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:718&r= |
| By: | Lee, Kang Koo; Shin, Seung-Ryong |
| Abstract: | South Korea has been under acute pressure to sustain its National Pension Plan without the risk of fund depletion. Given the looming fiscal threat, this study proposes the introduction of a new pension, a fully-funded system designed to ensure intergenerational equity. This reform aims to guarantee that future generations can receive pension benefits equivalent to the contributions paid and investment returns, without the fear of resource exhaustion. For contributions made prior to the reform, the benefits promised under the existing plan should be honored, while addressing the resultant financial shortfalls of the old pension through separate management and strategic utilization of the general budget to bridge these gaps. This study stresses the urgency of immediate action since the prompt implementation will substantially reduce fiscal stress. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:kdifoc:300080&r= |
| By: | Kemmerling, Achim; Neugart, Michael |
| Abstract: | Redistributive so-called social pension schemes have seen a remarkable surge in developing countries. These schemes often target the rural elderly and correlate with urbanization rates, urban rural-wage differentials, and family norms. We use this stylized evidence to motivate a political economy model for a Beveridgean pension system with trade-offs between four groups: the (poorer) rural old and young, and the (richer) urban old and young. We show under which conditions governments will install a pension system and increase its generosity as the share of the urban population rises, productivity differentials between urban and rural workers widen, or the social norm erodes. Our conclusion is that the role of the rural–urban divide in shaping redistribution merits more scholarly attention, as the gap between cities and the countryside widens in many developing countries. |
| Date: | 2024–06–24 |
| URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:146282&r= |
| By: | Bosco, Davide; Gilli, Mario |
| Abstract: | We study effort provision and incentivisation in a Tullock group-contest with m ≥ 2 groups that differ in size. A novel algorithmic procedure is presented that, under a symmetry assumption, explicitly characterises the equilibrium. Endogenous, optimal incentivisation schemes are then determined. Four results ensue. First, strategic interactions endogenously come in mean-field form: individual effort provision responds to the aggregate effort and average egalitarianism across groups. Therefore, the game is aggregative. Second, individuals endlessly cycle between zero and positive effort provision at some incentivisation schemes: no pure-strategy equilibria exist in these cases. Third, group size determines whether the egalitarianism of endogenous schemes increases or decreases in the average egalitarianism across groups. Fourth, all groups provide effort at the endogenous schemes if incentivisation is properly restricted. |
| Keywords: | Public Economics |
| Date: | 2024–06–18 |
| URL: | https://d.repec.org/n?u=RePEc:ags:feemwp:343508&r= |
| By: | Luigi Guiso (Einaudi Institute for Economics and Finance (EIEF) and CEPR); Tullio Jappelli (University of Naples Federico II, CSEF, and CEPR) |
| Abstract: | We implement a survey experiment to study whether awareness of the consequences of hydrogeological risk affects people’s willingness to fight it. To do so, we leverage a representative panel of 5, 000 Italian individuals interviewed at quarterly frequency, starting in October 2023. We elicit survey participants’ willingness to contribute to a public fund to finance investment to secure areas exposed to hydrogeological risk under different information treatments. We find that disclosing information about the consequences of hydrogeological risk causes individuals to increase both support for public funding and individual willingness to pay for the policy. Compared to the control group, individuals exposed to the treatment were 9 percentage points more likely to contribute to the fund and more willing to contribute an additional €29. Applying the information treatment to the whole working age population could raise as much as €0.26 billion per year. We provide evidence that individual willingness to pay depends on individual knowledge that the success of the policy depends critically on the willingness to pay of other citizens. |
| Keywords: | Natural Disasters; Willingness to Pay; Insurance. |
| JEL: | H31 H2 H23 |
| Date: | 2024–06–24 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:723&r= |
| By: | Stancu, Stefania |
| Abstract: | This study investigates the effectiveness of fiscal policy in macroeconomic stabilization during the COVID-19 health crisis through a Dynamic Stochastic General Equilibrium (DSGE) model, incorporating financial frictions and using Romanian empirical data from 2007-2020. We analyse the impact of a consumption and labour demand shock similar to the ones occurring during the COVID-19 health crisis and explore how discretionary fiscal measures can modulate their effects. The findings suggest that increased government spending during the economic downturns of COVID-19 appears to mitigate some of the adverse effects, particularly on output and investment. While consumption does not seem to benefit significantly from fiscal stimulus, public spending helps to moderate declines in output and bolsters investment, especially in scenarios with a financial accelerator. |
| Keywords: | fiscal policy, DSGE model, COVID-19, financial accelerator |
| JEL: | E2 E62 H12 H3 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121322&r= |