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on Public Economics |
| By: | Felix J. Bierbrauer (University of Cologne); Pierre C. Boyer (CREST, Ecole Polytechnique, Institut Polytechnique de Paris); Andreas Peichl (ifo Munich, LMU Munich, CESifo, IHS & IZA); Daniel Weishaar (University of Cologne) |
| Abstract: | The key question in multi-dimensional screening problems is how prices, incentives, or marginal tax rates in one economic activity should vary with other activities. We develop a theory of tax reforms in a setting with multidimensional heterogeneity amongst agents who take two economic decisions. Our leading application is the taxation of couples who choose an earnings level for each spouse. In our theoretical analysis, we characterize the conditions under which reforms of a given tax system yield Pareto- or welfare improvements. In an empirical application to the US, we quantify the welfare implications of such reforms. We also prove an impossibility result: under assumptions common in the tax perturbation literature, the hypothesis that the given status quo tax is optimal leads to a contradiction. Thus, the perturbation approach cannot be used to characterize a fully optimal tax system. |
| Keywords: | Tax reforms, Multi-dimensional screening, Taxation of Couples, Optimal taxation |
| JEL: | C72 D72 D82 H21 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:401 |
| By: | Adam Lavecchia; Robert McKercher; Alisa Tazhitdinova |
| Abstract: | This paper estimates the causal effect of income taxation on inter-provincial migration in Canada. We exploit a major tax decentralization reform between 1998-2001 that led to some provinces lowering their marginal and average tax rates more than others, particularly for top earners. Using a difference-in-differences design, we estimate a population stock-elasticity with respect to the net-of-average-tax rate of about 2.5-3 for young, unmarried high-income individuals. The estimates for older and married individuals are smaller and mostly statistically insignificant. We find that the population stock elasticity estimates are driven by a reduction the likelihood that young, unmarried and high-income individuals emigrate from their province of residence (i.e. out-migration) rather than a change to in-migration. This suggests that individuals react more strongly to tax changes in their home province rather than tax changes in other provinces. |
| Keywords: | migration, taxation, within-country mobility |
| JEL: | H2 H21 H24 H26 H71 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12600 |
| By: | Gaul, Johannes; Schulz, Inga |
| Abstract: | This paper examines whether multinational enterprises (MNEs) adapt to international anti-tax avoidance regulation by intensifying domestic profit shifting activities. We compile a novel dataset by mapping MNE ownership network structures that link international to sub-national tax haven subsidiaries over time. Our analyses show that tighter international rules lead more strongly affected firms to intensify their presence in sub-national tax havens, consistent with strong increases in profit tax revenues at these locations. This shift indicates that international tax policies have had bite in constraining cross-border tax avoidance. At the same time, our findings reveal MNEs' strategic flexibility and highlight domestic spillovers and local consequences of global tax reforms. |
| Keywords: | Corporate Networks, Geospatial Data, ATAD, CbCR |
| JEL: | H26 H71 K10 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:340013 |
| By: | Athiphat Muthitacharoen; Archawa Paweenawat; Krislert Samphantharak; Chanont Banternghansa |
| Abstract: | While most research on profit shifting focuses on multinational corporations, this study highlights how domestic corporate groups can exploit governance gaps in tax policy. Specifically, we use administrative data from Thailand to show how SME tax incentives inadvertently encourage intra-group profit relocation, revealing critical vulnerabilities in the design of size-based tax systems. We construct a comprehensive panel dataset covering all registered Thai firms from 2004 to 2017 by linking firm-level financial statements with ownership information to identify corporate group structures. Our empirical analysis exploits a 2011 reform that introduced a revenue-based eligibility threshold for SME tax incentives, creating differential tax treatment among affiliated firms within the same corporate group. The difference‑in‑differences analysis indicates strong evidence of tax-motivated profit shifting: profitability among tax-eligible SMEs within corporate groups increased by 75.8% from their pre-policy level when compared to ineligible affiliates. Our findings further suggest that corporate groups primarily engage in transfer pricing rather than strategic debt allocation as a means of maximizing total profits. We also find that these responses are significantly stronger among smaller corporate groups, groups with weaker governance structures, and those with lower industry diversification, suggesting that internal oversight and organizational complexity constrain opportunistic behavior. These findings demonstrate that profit shifting is not exclusive to multinational firms and underscore the importance of incorporating corporate group structures and governance realities into the design of domestic tax policy. |
| Keywords: | Profit shifting; Corporate groups; Corporate governance; Tax avoidance; Domestic transfer pricing |
| JEL: | H25 H26 K34 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:pui:dpaper:248 |
| By: | Zhiyang Jia; Snorre Skagseth; Thor O. Thoresen; Trine E. Vattø (Statistics Norway) |
| Abstract: | Whenstructural labor supply models are unavailable or impractical, the paper proposes a practical method for incorporating behavioral responses into static taxbenefit microsimulation models. Using elasticity estimates from the literature, the proposed external evidence procedure offers a flexible and transparent tool for incor porating behavioral effects into microsimulation. We distinguish between responses in income both at the in tensive and extensive margins. The framework is implemented within the Norwegian LOTTE microsimulation system and illustrated through two policy reforms: (i) a five percentage-point increase in the two top brackets of the labor income tax and (ii) the introduction of a work-related income deduction. Empirical results show that behavioral adjustments substantially offset mechanical revenue effects for high-income tax increases, while the work deduction generates positive participation responses but amplifies revenue losses due to phase-out ef fects. |
| Keywords: | microsimulation; tax-benefit model; behavioral response; quasi-experimental evidence |
| JEL: | C53 H24 H31 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ssb:dispap:1034 |
| By: | Guschanski, Alexander; Wildauer, Rafael |
| Abstract: | We analyse the potential of wealth taxes to reduce CO2 emissions through two transmission channels: the inequality channel, which links reductions in wealth inequality to lower emissions, and the consumption channel, which analyses how wealth taxes affect consumption by top wealth holders. We simulate the effects of various wealth tax designs over one- and ten-year horizons using harmonised microdata from 22 European countries. Our analysis accounts for survey non-response bias, heterogeneous rates of returns across households, and behavioural responses to taxation. We find that, through the inequality channel, an annual progressive wealth tax could reduce annual CO2 emissions by 7.5%–14.7% after ten years relative to a no-tax scenario, depending on tax progressivity. Through the consumption channel, the average reduction is between 1.5%–3.6%. These findings highlight the potential of wealth taxes to serve a dual purpose: curbing wealth concentration and contributing meaningfully to climate mitigation and justice, by focusing on high-net worth households who account for a disproportionate share of emissions. |
| Keywords: | wealth tax; wealth distribution; environmental effect; CO2 emissions |
| Date: | 2025–10–08 |
| URL: | https://d.repec.org/n?u=RePEc:gpe:wpaper:51227 |
| By: | Deniz Dutz; Morten Håvarstein; Magne Mogstad; Alexander Torgovitsky |
| Abstract: | We study the identification of labor supply elasticities from kinked budget sets in a model with income effects and individual heterogeneity in the elasticities. We provide point and partial identification results for compensated elasticities, uncompensated elasticities, and income effects. We use administrative data to apply our results to the Norwegian tax system, which exhibits a kink for the self-employed. There is clear bunching around the kink point, suggesting that the self-employed respond to the change in incentives created by the kink. We find that the bounds are often tight even under weak assumptions. Our results show that uncompensated elasticities are close to zero and compensated elasticities are sufficiently small to conclude that the excess burden of taxation is low. |
| JEL: | C14 C18 H21 H24 J22 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35047 |
| By: | Onaran, Özlem |
| Abstract: | A policy mix suggested by UNITE (2024) based on increasing public spending in health and education by increasing the wage rates of public sector workers by 23% and increasing employment amounting to a further 2.79%-point increase in public spending as a ratio to GDP, a 2%-point increase in public gross fixed capital formation, a 7.1%-point increase in the average effective tax rate on profit income, a progressive wealth tax on the top 1% increasing the average effective tax rate on wealth by %0.38%-point, and a New Deal for Workers increasing labour’s power, which is estimated to increase the wage rates in the private sector by 3.24% could lead to substantial improvements in income, employment and public finance. The estimated effects suggest that in response to this policy mix GDP increases by 22.44%, employment increases by 2.83%, private investment as a ratio to GDP increases by 6.50%, public debt/GDP decreases by 9.45%-point, thanks to a very strong increases in GDP, despite a high increase in public spending. |
| Keywords: | public spending; taxation; macroeconomy |
| Date: | 2024–06–17 |
| URL: | https://d.repec.org/n?u=RePEc:gpe:wpaper:47397 |
| By: | Cristiano C. Carvalho; Trine E. Vattø (Statistics Norway) |
| Abstract: | This paper examines how an often-overlooked source of pay transparency—the public disclosure of tax information—affects gender wage gaps. We exploit a 2001 change in Norway that made individual tax returns searchable online. Using matched employer–employee data and a difference in-differences design, we find that within-firm gender wage gaps fell by 2.2 percentage points (8.7 percent), driven by rising female wages. Effects are strongest in private-sector firms, industries with initially larger gaps, and municipalities that previously lacked easy access to printed tax lists. Wage gains are concentrated among job-changing women, suggesting that broad-based transparency mainly operates through improved information for job search. |
| Keywords: | Gender Wage Gap; Income Transparency; Public Disclosure of Tax Information |
| JEL: | J16 J31 J38 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ssb:dispap:1033 |
| By: | Jacob Bastian; Melody Harvey |
| Abstract: | Consumer sentiment influences household behavior in important ways, yet we lack causal evidence on whether government policies themselves shape these perceptions. We help fill this gap by studying the expiration of the expanded 2021 Child Tax Credit (CTC), which abruptly reduced household income for millions of families. Using monthly microdata from the University of Michigan's Consumer Sentiment Survey and plausibly exogenous variation in benefit losses across households, we implement continuous difference-in-differences and instrumental variables strategies. We find that each $1, 000 in lost CTC benefits reduces sentiment by 1.7 points (or about 2.4%), with largest effects among lower-income families with multiple children. These effects persist two years after expiration and remain robust to controls for inflation, interest rates, and macroeconomic conditions. The results suggest that fiscal policy impacts perceived economic well-being beyond contemporaneous income effects, with potential implications for household economic activity, political attitudes, and voting behavior. |
| JEL: | E32 E71 H31 I38 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35059 |
| By: | OKAMURO, Hiroyuki; NISHIMURA, Junichi |
| Abstract: | Public R&D support attracts both academic and practical attention. Recent studies investigate the combination of different R&D policy instruments (policy mix), focusing on R&D subsidies and tax credits (“hard support”), despite the variety of actual instruments covering “soft support, ” such as matching, mediation, and consultation services. Moreover, despite the decentralization of R&D policies in several countries, few studies have addressed place-based (city-level) R&D support with a variety of policy instruments. This study fills these gaps by estimating the effects of the local R&D policy mix, covering both hard and soft instruments, based on unique panel data of 146 Japanese cities for 18 years. Using panel fixed-effects estimations, we find that hard support has positive and significant effects on patent applications per person, while soft support significantly increases productivity. Finally, the coefficient of the interaction term of hard and soft support, estimated by the system GMM, suggests their complementarity |
| Keywords: | R&D, policy mix, place-based policy, municipality, innovation |
| Date: | 2026–03–24 |
| URL: | https://d.repec.org/n?u=RePEc:hit:hiasdp:hias-e-158 |