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on Public Economics |
| By: | Abdoulaye Ndiaye; Zhixiu Yu |
| Abstract: | Raising the retirement age is a common policy response when social security schemes face fiscal pressures. We develop and estimate a dynamic life cycle model to study optimal retirement and tax policy when individuals face health shocks and income risk and make endogenous retirement decisions. The model incorporates key features of Social Security, Medicare, income taxation, and savings incentives and distinguishes three channels through which health affects retirement: nonconvexities in labor supply due to health-dependent fixed costs of working, earnings reductions, and mortality risk. We estimate our model to match US microdata and show that labor supply nonconvexities play a dominant role in driving early retirement, making rigid increases in the retirement age welfare reducing. In contrast, more flexible policies, such as increasing the dependence of Social Security benefits on the claiming age, can improve welfare and pay for themselves with a fiscal surplus. We map a range of policy reforms to their marginal values of public funds (MVPFs), showing that certain incentives to delay claiming offer MVPFs of infinity while broad-based retirement age increases have negative willingness-to-pay. These findings offer novel retirement policy prescriptions and challenge the prevailing emphasis on raising the retirement age. |
| Keywords: | flexible retirement, optimal taxation, social security reform, life cycle model, health shocks, retirement decisions, marginal value of public funds (MVPF), labor supply nonconvexities, mortality risk, medicare |
| JEL: | H21 H55 J26 D15 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11904 |
| By: | Radek Stefanski; Lassi Ahlvik; Jørgen Juel Andersen; Torfinn Harding; Alex Trew |
| Abstract: | How large are the productivity differences arising from micro-level distortions, and how much of that is due to tax policy? Using over a century of field-level data (1900-2023), this paper examines the role of field-level revenue taxes in explaining misallocation in the oil and gas industry, a single large sector that produces a homogeneous, globally-traded good. A key advantage is our ability to link model-implied distortions directly to these observed tax rates. We show that misallocation is significant in the oil industry, and that over half of this misallocation can be accounted for by the dispersion in revenue tax rates across fields, exceeding the 2-25% explanatory power typical in studies of misallocation sources. We show that nearly all of the impact of this tax dispersion operates through the intensive margin (the inputs allocated at a field) rather than the extensive margin (the choice to enter a field). These findings have direct implications for tax policy. |
| Keywords: | keywords |
| JEL: | O47 O11 D24 Q32 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11915 |
| By: | Deparade, Darius; Jarmolinski, Lennart; Mohr, Peter |
| Abstract: | Tax evasion is associated with high social and fiscal costs. To address these, many governments employ behavioral interventions given their low implementation costs and high potential efficiency. Although many studies report positive effects of behavioral interventions to combat tax evasion, the effect sizes are often quite small. This may result from the partial cancellation of heterogeneous effects and prompts calls in the literature for individualized or group-tailored interventions. While classification approaches for taxpayer types exist, their practical implementation is limited by data availability. We systematically review 144 studies conducted between 1996 and 2024 and show that group-tailored interventions along key inequality dimensions-gender, income, age, and regionality-may not only enhance tax compliance but also help address inequality. Furthermore, our heterogeneity analysis shows that intervention effectiveness can be enhanced by the incorporation of specific characteristics related to framing, intervention frequency, and communication channels. Finally, we present a theoretical model to support group-tailored interventions and thus provide policymakers with an efficient strategy to combat tax evasion. |
| Keywords: | Tax Compliance, Behavioral Intervention, Heterogeneity, Inequality |
| JEL: | H26 D31 D90 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:fubsbe:318371 |
| By: | Michael E. Darden; Reginald B. Hebert; Michael F. Pesko; Samuel Sturm |
| Abstract: | We study the effects of cigarette excise taxes on smokers’ household budgets. In a randomized survey experiment, smokers respond to tax increases by adjusting cigarette shopping behaviors, substituting towards other tobacco products, and reducing both discretionary and human capital-related expenditures. Using Consumer Expenditure Survey data and a quasi-experimental design, we find cigarette taxes reduce smoking prevalence but increase cigarette expenditures among continuing smokers. Additionally, a $1 increase in cigarette taxes causes a 2.12% decline in human capital-related expenditures among below median income smokers. Our work uncovers important unintended consequences of cigarette taxes, particularly for low-income individuals. |
| JEL: | I10 I12 I14 I18 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33746 |
| By: | Zheng Jian (Macroeconomic Policy and Financing for Development Division, United Nations Economic and Social Commission for Asia and the Pacific); Muhammad Azhar Shah (United Nations Resident Coordinator’s Office in Pakistan) |
| Abstract: | The objective of this policy brief is to provide an easy-to-digest overview of the factors affecting tax compliance in developing countries, including taxpayer motives at the micro level (section II) and determinants of national tax capacities at the macro level (section III), as well as a summary of policy options based on the discussion (section IV). Section V describes the tax situation in Pakistan and discusses the main messages and insights of the policy brief for Pakistan. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:unt:pbmpdd:pb130 |
| By: | Hirose, Kosuke; Ishihara, Akifumi; Matsumura, Toshihiro |
| Abstract: | Motivated by the recent global trend of net-zero-emissions environmental regulations, we investigate the relationship between emissions tax rates and firm profits in oligopolies. Our result indicates that when the resulting emission levels are approximately zero, a marginal increase in the tax rate enhances firms' profits except in monopoly markets. This finding suggests that firms might not resist a further increase in environmental tax if the target emissions level is sufficiently low. Moreover, we present parametric numerical examples suggesting that the profit-enhancing range is large and not limited to near-zero emissions. |
| Keywords: | net-zero-emissions industries; emissions tax; oligopolies |
| JEL: | L13 L51 Q52 |
| Date: | 2025–05–23 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124825 |
| By: | Narayana R. Kocherlakota |
| Abstract: | A classic result in trade theory is that it is socially optimal to set the tariff on a good equal to the inverse of the elasticity of its foreign supply. However, this result is based on the assumption that the government can use lump-sum taxes. The paper considers a simple open representative agent economy and characterizes second-best tariffs when the government's only non-tariff source of revenue is linear labor income taxation. If public spending needs are sufficiently large, and import demand is more (less) income-elastic than non-import demand, then the second-best tariff is lower (higher) than the standard optimal tariff. |
| JEL: | E60 F10 H21 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33759 |
| By: | Noguchi, Soma |
| Abstract: | This study examines a new pension system in which pension benefits increase in proportion to the number of children. We demonstrate that transitioning to this new pension system can be achieved as a Pareto improvement. Additionally, we show that under certain conditions, the population may not decline within this system. |
| Keywords: | OLG, fertility, PAYG, pension, population. |
| JEL: | D91 H55 J13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124685 |
| By: | Mauro, M.;; Porcelli, F.;; Vidoli, F.; |
| Abstract: | The integration of functional and spatial data in clustering methods is increasingly relevant in regional and urban economics. This paper introduces a novel spatial clustering algorithm that simultaneously considers geographical proximity and the similarity of temporal trends to identify territorially coherent clusters. The methodology, validated through simulations and applied to realworld data on Italian municipal health tax detractions, reveals significant geographical groupings characterized by similar levels and dynamics of tax benefits. Findings highlight that tax detractions align more closely with the economic capacity of individuals and areas rather than actual healthcare needs, raising concerns about equity and the territorial distribution of fiscal advantages. This divergence between formal universal healthcare principles and practical fiscal outcomes underscores the need for spatially aware policy tools. The proposed approach offers a replicable framework for analyzing spatio-temporal patterns across various domains, balancing interpretability and methodological rigor. |
| Keywords: | spatial clustering; functional data analysis; tax expenditures; health economics; |
| JEL: | C38 H51 H71 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:yor:hectdg:25/05 |
| By: | Lin, Ziqi (Rachel) |
| Abstract: | In this paper, a kernel Extreme Learning Machine (KELM) model based on vector weighted average algorithm is proposed for the prediction of national tax revenue ratio, which provides a new way of thinking and method for tax revenue prediction. By analyzing the correlation between each index and tax share, it is found that gasoline price and life expectancy are significantly positively correlated with tax share, while fertility rate and birth rate are significantly negatively correlated. The model shows excellent predictive performance on both training set and test set, with an R² of 0.995 in training set and 0.994 in test set, indicating that the model has excellent generalization ability. In addition, the root mean square error (RMSE) of the training set and the test set are 0.185 and 0.177, respectively, and the relative prediction deviation (RPD) is 14.234 and 13.178, respectively, which further verifies the high accuracy and stability of the model. Scatter plots of actual predicted versus actual values show that the model is able to accurately capture trends in tax shares with little prediction error. In summary, the optimized KELM model proposed in this paper not only has excellent performance on known data, but also has good expansion ability, and can be effectively applied to the tax share prediction of unknown data, providing a reliable tool for relevant policy making and economic analysis. The research of this paper provides a new technical path for the field of tax forecasting, which has important theoretical significance and practical value. |
| Date: | 2025–05–29 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:ymjw9_v1 |
| By: | Dina Pomeranz; Juan Carlos Suárez Serrato |
| Abstract: | The OECD has promoted the adoption of internationally standardized transfer pricing rules to curb profit shifting for tax avoidance by multinational firms. Bustos et al. (2023) analyzed a large reform in Chile based on these OECD standards and found that it led to a surge in tax advisory services. This paper investigates the external validity of this finding. Combining employment history data with information on countries’ strictness of transfer pricing regulations over time, we analyze the effect for four countries: Chile, Colombia, Spain, and Uruguay. Event-study difference-in-differences analysis shows that reforms led to substantial increase in transfer pricing consultants in most cases. The effect is larger when the reform is stronger and when a country has a lower level of pre-treatment transfer pricing strictness or of transfer pricing consultants. |
| JEL: | F23 H26 J21 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33736 |
| By: | Lutz Hendricks; Tatyana Koreshkova; Oksana Leukhina |
| Abstract: | As college attainment expanded in the U.S., the fraction of public funds allocated to selective colleges and universities declined. Does this make sense from an efficiency standpoint, given that the majority of college entrants face the highest financial returns at selective colleges? Should the states instead be expanding access to high quality colleges? In this paper, we examine reallocating public funds from low quality to high quality colleges in a spending-neutral way. We find that this policy leads to a decline in aggregate earnings and intergenerational income mobility. Public spending on lower quality schools is well-justified. |
| Keywords: | college quality; human capital; public finance of higher education |
| JEL: | J24 J31 I23 I26 H21 H22 |
| Date: | 2025–03–20 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedlwp:100019 |
| By: | Daniela Andrén; Thomas Andrén; Martin Kahanec |
| Abstract: | This study investigates whether couple ethnic composition shapes household welfare dependence, a relevant dimension overlooked in previous studies. Using fifteen years of Swedish panel data and a dynamic discrete-choice model that addresses initial-conditions and unobserved heterogeneity, we analyze structural state dependence in social assistance across households of intra-ethnic and inter-ethnic couples. Consis-tent with previous studies, we find that thatwelfare participation is much higher for foreign-born individuals in both intra- and inter-ethnic couples than for couples of na-tives. However, the lowest structural state dependence in social assistance was found for households of inter-ethnic couples, while individuals from couples of natives show the strongest state dependence, nearly five times higher than for households of couples com-prising foreign-born women with Swedish-born men and stable couples of foreign-born men and Swedish-born women. Our findings offer important policy implications for ad-dressing social assistance needs across diverse household configurations in increasingly multicultural and fiscally constrained societies. Policy and political discourse focused primarily on reducing immigrants’ welfare dependency may be misguided, as house-holds of native-born individuals exhibit stronger structural state dependence despite lower overall participation rates. Policymakers should broaden their focus to include households of couples of natives in efforts to reduce welfare persistence. |
| Date: | 2025–05–20 |
| URL: | https://d.repec.org/n?u=RePEc:cel:dpaper:72 |