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on Public Economics |
| By: | Ricardo Fenochietto; Carola Pessino; Nicole Fenochietto |
| Abstract: | Using Stochastic Frontier Analysis, this paper updates, for 123 countries, the estimates of tax capacity—defined as the maximum level of revenue a country can feasibly achieve— and tax effort —measured as the ratio of actual tax revenue to tax capacity. It also introduces two novel models that decompose the frontier tax gap —the difference between actual tax revenues and tax capacity— into tax policy and tax administration components. Assessing tax effort is essential before introducing new taxes or raising existing ones, as it helps determine the scope for additional revenue mobilization within the current system. The frontier tax gap decomposition thus provides a rigorous diagnostic framework for identifying where reform efforts should be initiated and where they should be most effectively targeted. |
| Keywords: | Tax Capacity; Tax Effort; Tax Revenue; Revenue Mobilization; Taxation and growth. |
| JEL: | C23 C51 H11 H21 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cem:doctra:919 |
| By: | Holter, Hans; Krueger, Dirk; Stepanchuk, Serhiy |
| Abstract: | This paper argues that a progressive tax system combined with individual taxation of married couples can generate more revenue than the current household-based U.S. system, especially when the extra revenues do not induce negative labor supply effects through increased government transfers. A progressive system that taxes individuals rather than couples jointly leads to larger labor force participation and higher average human capital, creates more fiscal space, Laffer curves shift up and social welfare potentially rises. In our model with one- and two-earner households, human capital and an extensive margin labor supply decision, the peak of the Laffer curve is 18 percentage points higher with an individual-based, progressive tax system than with the current U.S. tax system. The maximum revenue is attained with 100% more progressivity than the current system, and at an average tax rate of 42%. Progressive taxation, when imposed on individuals rather than households, lowers the average tax rate for individuals with modest potential income that are close to the participation margin. At the same time it creates a positive income effect on the labor supply of these individuals by reducing the net income of their higher earning spouses and limiting their net earnings potential in the case of a high temporary labor productivity. Steady state social welfare is larger with individual taxation. The optimal progressivity is higher than the current U.S. status quo, and results in welfare gains of 0.8% in consumption-equivalent variation. Cohorts born during the transition also experience significant welfare gains from this reform. |
| Keywords: | Laffer curve |
| JEL: | E62 H20 H60 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21415 |
| By: | Niels Johannesen; Lauge Larsen; Nadine Riedel |
| Abstract: | In a coordinated effort to curb tax evasion, governments systematically exchange information about bank accounts with foreign owners. We study the compliance effects of the policy in the context of South Africa using information reports on 1 million foreign bank accounts linked to income and audit data. We find that self-reported foreign income increased sharply and persistently at the onset of information exchange, but remained much below the true foreign income implied by the information reports. We explain the partial compliance response by showing that, contrary to standard theory of third-party reporting, the detection risk associated with non-compliance was modest. |
| Keywords: | tax compliance, tax evasion, tax enforcement, international taxation, information exchange |
| JEL: | H26 H31 H87 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12747 |
| By: | Petter Bjerksund; Guttorm Schjelderup |
| Abstract: | This paper analyzes the valuation of publicly traded stocks subject to capital income and wealth taxation when expected returns are time-varying. We show that, in an efficient capital market, investor valuation coincides with the market price under a broad class of tax systems, including accrued and realized capital gains taxation. The result holds for arbitrary holding periods provided that tax shields are set equal to the investor's after-tax risk-free rate. The key mechanism is that taxation introduces a deterministic payoff component that can be replicated using traded assets, leaving the pricing of the stochastic return component unaffected. |
| Keywords: | wealth tax, capital income tax, assets valuation, time varying expected returns |
| JEL: | G11 G15 H24 H30 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12737 |
| By: | Felix Hugger; Pierce O’Reilly; Lucía Contreras |
| Abstract: | This paper provides an early empirical, ex post assessment of how MNEs have responded to the introduction of the Global Minimum Tax (GMT). The GMT, implemented in 2024, represents a fundamental change in international taxation. The paper analyses the realised responses of MNEs exploiting the EUR 750 million threshold to identify causal effects. Specifically, the paper uses group level financial and ownership data from the Orbis database and implements a difference in differences strategy that compares MNEs just above and below the scope defining revenue threshold. The paper evaluates whether the GMT has affected MNE effective tax rates, investment, and employment, and whether firms adjusted their behaviour in anticipation of the reform. The paper includes heterogeneity analysis to assess which company types and sectors drive the results. Finally, the paper uses the analysis on the impact of ETRs to estimate the potential revenues raised by the GMT in its first year of introduction. |
| Keywords: | business functions, corporate tax, Global Minimum Tax, international taxation, MNE, multinational enterprises |
| JEL: | F23 H25 H26 |
| Date: | 2026–07–15 |
| URL: | https://d.repec.org/n?u=RePEc:oec:ctpaaa:77-en |
| By: | Agostini, Claudio; Asatryan, Zareh; Bach, Laurent; Bernier, Govindadeva; Berthana, Marinho; Bilicka, Katarzyna; Brockmeyer, Anne; Bukovina, Jaroslav; Falcone, Guillermo; Garriga, Pablo; He, Yuxuan; Janskı, Petr; Koumanakos, Evangelos; Lichard, Tomas; Palguta, Jan; Patel, Elena; Pereira dos Santos, João; Perrault, Louis; Schwab, Thomas; Seegert, Nathan; Skultety, Oliver; Strohmaier, Kristina; Todtenhaupt, Maximilian; Vuletin, Guillermo; Zudel, Branislav |
| Abstract: | Do firms respond similarly to corporate tax incentives across countries? We provide globally comparable estimates of the corporate elasticity of taxable income using administrative tax return data from sixteen countries and a unified empirical framework. Exploiting bunching at a common kink, zero taxable income, we estimate elasticities ranging from 0.08 to 1.9, with an average of 0.79. To explain this heterogeneity, we link elasticities to tax policy, firm characteristics, and country fundamentals. These differences imply that identical corporate tax reforms can generate sharply different revenue effects across countries, leading to substantial heterogeneity in the efficiency costs of corporate taxation. |
| Keywords: | Corporate taxation; Elasticity; Bunching |
| JEL: | C14 H25 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21274 |
| By: | Dominika Langenmayr; Rohit Reddy Muddasani |
| Abstract: | Firms in the digital economy often pay little tax in the countries where their customers are based. In response, market countries have introduced digital service taxes on the revenue of these firms to indirectly tax their profits. We study the incidence of these taxes using data on Amazon, the largest online retailer. We find that in most countries, Amazon increased its fees by roughly the amount of the digital service tax. Firms using Amazon as a platform have largely passed these increased fees on to consumers. Large digital firms thus bear only a small part of the tax burden, but the tax may nevertheless succeed in making them less competitive relative to brick-and-mortar retailers. |
| Keywords: | tax incidence, digital service taxes, two-sided markets, platforms |
| JEL: | H22 D40 L50 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12713 |
| By: | Junghun Kim |
| Abstract: | This paper asks how local tax revenues should be attributed when tax rates, tax bases or tax-sharing arrangements are shaped by higher-level governments. To address this question, it combines tax attribution criteria from the System of National Accounts (SNA) with a historical and institutional analysis of key country cases that exemplify tax sharing and centrally determined local taxation, notably Germany and Japan. This framework contrasts with approaches that apply standard fiscal federalism models without fully accounting for country-specific legal and institutional arrangements. Applying it suggests that, in some countries, revenues reported as local taxes may instead reflect centrally determined tax-sharing arrangements or centrally determined local taxes as defined under SNA 2008 criteria. Where such revenues are reported as local taxes, reported figures may diverge from international attribution criteria, including in national accounts and submissions to international organisations. These findings suggest that local tax shares should be interpreted in light of institutional context, including the degree of central-local integration of public finance in unitary countries and cooperative federal systems, rather than as a simple measure of local fiscal autonomy in empirical studies of fiscal decentralisation and economic growth. They also indicate that, in many countries, local tax shares are relatively small, reinforcing the need to distinguish between revenue attribution and effective local taxing power. |
| Keywords: | centrally determined local taxes, fiscal decentralisation, local tax autonomy, tax attribution, tax-sharing arrangements |
| JEL: | H71 H77 H20 |
| Date: | 2026–06–29 |
| URL: | https://d.repec.org/n?u=RePEc:oec:ctpaab:55-en |
| By: | Kiarsi, Mehrab; Rendahl, Pontus |
| Abstract: | This paper studies optimal fiscal policy in an economy with frictional labor markets. We show that, under standard efficiency conditions, a suitable combination of constant taxes implements the first-best allocation, with public debt absorbing government spending shocks. Labor market frictions therefore do not overturn the basic tax smoothing principle: taxes remain stable while debt adjusts to fiscal disturbances. We then assess the robustness of this result in a quantitative environment where the Ramsey planner lacks sufficient tax instruments to implement the first best. Even in this case, optimal taxes remain highly stable and fiscal adjustment operates primarily through public debt. Allowing taxes to vary over the business cycle delivers negligible additional welfare gains relative to constant taxes. Overall, fiscal policy in frictional labor markets operates by smoothing taxes and using debt to absorb fiscal shocks, rather than by relying on time-varying distortionary taxation. |
| Keywords: | Ramsey taxation |
| JEL: | E26 H21 J64 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21497 |
| By: | Naruki Notsu (Osaka School of International Public Policy, the University of Osaka); Haruaki Hirota (Faculty of Economics, Musashi University) |
| Abstract: | This paper studies how administrative consolidation affects the performance and cost of fiscal capacity. While consolidation may reduce administrative costs by exploiting scale effects, it may also disrupt the accumulated organizational resources and routines through which governments collect taxes. We examine this trade-off, focusing on Japan’s Great Heisei Municipal Mergers, a large wave of municipal consolidation in the early 2000s. Using an event-study based on a difference-in-differences design, we find that mergers reduce tax collection rates beginning in the pre-legal-merger transition period. In contrast, tax administrative costs fall only after formal consolidation, consistent with economies of scale in tax administration. We further find that tax revenue collected per unit of administrative cost increases after consolidation despite the decline in collection rates. These findings show that administrative consolidation weakens the collection margin of fiscal capacity during organizational transition, while lowering the resource cost of raising revenue enough to improve overall cost-effectiveness. The results highlight a trade-off between the operational performance and cost-effectiveness of fiscal capacity. |
| Keywords: | Fiscal capacity, Tax administration, Administrative consolidation, Economies of scale |
| JEL: | H71 H72 H11 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:osp:wpaper:26e009 |
| By: | Tomoyuki Nakajima (Faculty of Economics, The University of Tokyo) |
| Abstract: | I study optimal taxation in a directed–search economy with moral hazard, in which firms post output–contingent wage contracts that provide workers with insurance and incentives. Because the market prices these margins, the income tax is freed to redistribute alone: it is lump sum under a utilitarian planner, and under a non–utilitarian planner its marginal rate takes the transparent form τ′(ω)/[1 − τ′(ω)] = −κ κγ′(c (ω)), proportional to the slope of the social welfare weight at realized consumption and free of the skill distribution and labor–supply elasticities that dominate the Mirrleesian formula. A subsidy to vacancy creation corrects a fiscal externality on job creation, and an unemployment benefit handles the extensive margin. I then let productivity be unobservable. Single–crossing survives the moral hazard, so the downward incentive constraint binds and the high type retains an information rent; the resulting screening distortion is borne by the market’s wage schedule rather than by the tax, and the optimal anonymous income tax keeps the transparent form with the redistributive coefficient replaced by a composition–weighted average across types. A calibrated example gives the mechanism quantitative content. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:tky:fseres:2026cf1275 |
| By: | Gökhan Ider; Malte Rieth |
| Abstract: | We examine the aggregate effects of government spending and tax changes in a monetary union. We show theoretically that government consumption and government investment shocks have multipliers above 1, and consumption tax and income tax shocks have multipliers below 1. We test the predictions on quarterly euro area data, identifying the four fiscal shocks in a panel structural vector autoregression through time fixed effects and cross-country heteroskedasticity. Both spending shocks have multipliers above 1, and both tax shocks have multipliers below 1. The analysis suggests that spending policy stabilizes output more efficiently than tax policy in a monetary union. |
| Keywords: | Fiscal policy, general equilibrium model, structural vector autoregressions, government spending, taxes, panel data, euro area |
| JEL: | C32 E32 E62 F45 H20 H50 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2170 |
| By: | Holm, Martin Blomhoff; Jamilov, Rustam; Jasinski, Marek; Nenov, Plamen |
| Abstract: | This paper proposes a novel approach to estimate the elasticity of intertemporal substitution (EIS) of firm owners using a quasi-natural experiment and new theoretical insights on spending responses to anticipated dividend tax changes. We study Norway's dividend tax reform, announced in 2004 and implemented in 2006, which raised the dividend tax rate by 28 percentage points. Using administrative data and a dynamic difference-in-differences framework, we find that exposed households increased spending after the announcement and reduced it following implementation. This pattern is consistent only with an EIS above 1. Using a structural model, we estimate owners' EIS to be 1.5. |
| JEL: | D15 E21 H25 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21523 |
| By: | Jose René Orozco; Luisa Dressler; Clara Gascon; Laura Gutiérrez Cadena |
| Abstract: | This paper analyses corporate income tax incentives for investment in ten Latin American and Caribbean (LAC) countries. It finds that incentives are often tax exemptions, but expenditure-based incentives are more common than in other developing regions. Tax incentives tend to involve multiple eligibility criteria and are implemented through fragmented legal and institutional frameworks. The paper quantifies the impact of incentives on effective tax rates (ETRs), finding that they vary widely across countries and sectors. Similar projects can face different tax treatment within the same country when multiple incentives apply. On average, incentives reduce ETRs by 47% for tourism investments (including hotel activities and infrastructure), 55% for renewable energy generation, and 85% in special economic zones, relative to standard tax treatment. The findings suggest that the ten LAC countries covered in the paper could reassess whether incentives are the most appropriate policy tool, favour expenditure-based measures, streamline eligibility conditions, consolidate incentives in core legislation, and institutionalise regular monitoring and evaluation to improve value for money. |
| Keywords: | corporate income tax, effective tax rates, FDI, Latin America and the Caribean, tax incentives |
| JEL: | F21 H25 H32 O14 |
| Date: | 2026–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:oec:ctpaaa:76-en |
| By: | Toshiyuki Uemura (School of Economics, Kwansei Gakuin University) |
| Abstract: | This study develops a Salop-type circular model to analyze the impact of Japan's Hometown Tax Donation system (Furusato Nozei) on the fiscal balance of local governments and household economic welfare. In the model, households endogenously choose the local government to which they donate based on the donation price, the brand strength of the reciprocal gifts, and idiosyncratic attachment. The system affects household welfare through two channels: private utility derived from reciprocal gifts and utility from public goods financed by local government fiscal balances. We develop a unified theoretical framework incorporating these channels and examine its implications using both numerical simulations and empirical analysis. The results show that deficit local governments are predominantly located in urban areas, whereas surplus local governments are more common in rural areas. Urban local governments experience fiscal deterioration due to donation outflow, leading to a decline in per capita welfare through reduced public goods provision. In contrast, rural local governments can sustain per capita welfare by improving their fiscal position through attracting donations, even in the presence of population decline. Furthermore, the Local Allocation Tax system partially offsets revenue losses, thereby mitigating the decline in economic welfare. |
| Keywords: | hometown tax donation system, Salop-type circular model, economic welfare, local government fiscal balances |
| JEL: | H71 H72 H77 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:kgu:wpaper:311 |
| By: | Antoine Belgodere (LISA - Laboratoire « Lieux, Identités, eSpaces, Activités » (UMR CNRS 6240 LISA) - CNRS - Centre National de la Recherche Scientifique - Università di Corsica Pasquale Paoli [Université de Corse Pascal Paoli]); Georges Casamatta (LISA - Laboratoire « Lieux, Identités, eSpaces, Activités » (UMR CNRS 6240 LISA) - CNRS - Centre National de la Recherche Scientifique - Università di Corsica Pasquale Paoli [Université de Corse Pascal Paoli], TSE-R - TSE-R Toulouse School of Economics – Recherche - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | Since 2015, French municipalities facing high housing market pressures have been allowed to levy a surcharge on the housing tax applied to second homes. Using a synthetic differencein-differences design, we find a substantial decline in the declared number of second homes and a significant increase in housing tax revenues in treated municipalities, but no evidence of a decrease in housing prices. Drawing on dwelling-level transition microdata, we show that most of the apparent reduction in second homes is driven by strategic reclassification for tax purposes rather than genuine changes in occupancy. |
| Keywords: | Synthetic difference-in-differences, Tax reform, Housing taxation, Second homes |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05663707 |
| By: | Carsten Creutzburg (Chair for Economic Policy, University of Hamburg); Elias Benedict Leppert (Chair for Economic Policy, University of Hamburg); Wolfgang Maennig (Chair for Economic Policy, University of Hamburg) |
| Abstract: | In this paper, we examine whether local business taxation influences the spatial organization of domestic freight transport. We combine German directional county-to-county road freight data with county-level business tax rates for the period 2010-2023 and estimate a series of Poisson pseudo-maximum likelihood gravity models. The results reveal a robust relationship between local fiscal conditions and bilateral freight activity. Higher business tax rates are associated with lower road freight volumes, with the effect depending on the joint tax environment of the origin and destination regions. In particular, freight flows are significantly lower when both counties connected by a transport relationship are characterized by comparatively high business tax rates, highlighting the inherently bilateral nature of fiscal influences on goods movements. The estimated effects are robust to alternative lag structures, the exclusion of highly populated counties, and corrections for potential finite-sample bias. By identifying local fiscal policy as a determinant of interregional freight flows, the paper extends conventional freight-demand models beyond transport and logistics factors and establishes a novel link between public-finance institutions and the geography of economic activity. |
| Keywords: | Public-finance institutions, geography of economic activity, business taxation, road freight activity |
| JEL: | F14 H25 H32 R12 |
| Date: | 2026–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:hce:wpaper:083 |
| By: | Holden, Steinar (Department of Economics, University of Oslo); Markussen, Simen (Ragnar Frisch Centre for Economic Research); Røed, Knut (Ragnar Frisch Centre for Economic Research) |
| Abstract: | Differentiation of the employer-born payroll tax may be a tool to raise employment for groups whose wage entitlements are set above market clearing levels – e.g., through collective bargaining, minimum wage legislation or implicit contracts. We provide an empirical evaluation of a reform in Norway in 2002 whereby the payroll tax for mature (62+) workers was reduced by 4 percentage points. Our findings indicate that the reform led to a 2-3% increase in total hours worked by persons aged 62-64. Approximately 25% of the tax cut was passed on to the workers in the form of higher hourly wages. |
| Keywords: | payroll tax, tax incidence, labor demand, labor supply, difference in differences |
| JEL: | H22 E24 J23 J26 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18727 |
| By: | Janjala Chirakijja; Pinchuan Ong |
| Abstract: | Economists typically treat labor supply responses to wages and taxes as equivalent. We show that social preferences towards tax-funded government expenditures induce differences between the wage and net-of-tax rate elasticities of labor supply in canonical models. We use a large-scale vignette experiment to show that wage elasticities of labor supply are meaningfully larger than their net-of-tax rate counterparts, consistent with social preferences affecting labor supply. We show relevance for real labor market decisions by leveraging an existing elasticity of taxable income meta-analysis. Hence, models calibrated using net-of-tax rate elasticities when wage elasticities are more suitable understate individuals’ labor supply responses. |
| Keywords: | Labor Supply Elasticity; Taxation; Social Preferences |
| JEL: | J22 H24 H41 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:pui:dpaper:259 |
| By: | Daniel Logan (Public Policy at UCD) |
| Abstract: | This paper analyses the perceived beneficiaries of reduced Value Added Tax (VAT) rates set by successive Irish governments over the period 2011-2026, and whether those beneficiaries were perceived as deserving. A second reduced rate of VAT has been applied to the hospitality industry on three separate occasions since 2011, despite initially being conceived of as a temporary stimulus during an economic downturn. This paper combines Wilson’s typology of policies and Schneider and Ingram’s Social Construction theory, arguing that until 2024 the second reduced rate of 9% was applied at times when the policy was perceived to have diffuse benefits, or when the hospitality industry was socially constructed as being deserving of benefits. When neither of these conditions held, the policy was eventually reversed. Neither of these conditions held at the time of the announcement of the most recent introduction of the second reduced rate in October 2025, indicating the potential for ongoing political turbulence surrounding this policy until a more stable political resolution is arrived at. This paper contains specific findings on the segmentation of target populations into ‘deserving’ and ‘undeserving’ subgroups, the delivery of benefits to ‘undeserving’ populations, and implications for the rationale at EU level for the application of reduced rates of VAT to hospitality industries. |
| Keywords: | Reduced rates of Value Added Tax (VAT), Wilson’s policy typology, Social Construction theory |
| JEL: | E02 F02 F13 H25 H32 |
| Date: | 2026–06–23 |
| URL: | https://d.repec.org/n?u=RePEc:ucd:wpaper:202603 |
| By: | Bruno Bosco; Paolo Maranzano |
| Abstract: | Mean reversion, the tendency for taxpayers with unusually high or low income in one period to move towards their long-run average, is a key challenge for estimating the elasticity of taxable income (ETI), as it generates bias. We show that this bias can be characterised through the variance of the tax treatment and its covariance with windfall gains in an autoregressive model of taxable income dynamics. We further show that the bias decreases when the tax reaction of marginal treated taxpayers is weaker than that of average treated taxpayers. The paper provides analytical derivations and interpretation for these results. |
| Keywords: | Elasticity of Taxable Income (ETI); Mean reversion and estimation bias; Variancecovariance between tax treatment assignment and windfall income shocks; Magnitude and persistence. |
| JEL: | H30 H24 C22 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:mib:wpaper:578 |
| By: | Andreas Fagereng; Luigi Guiso; Marius Ring |
| Abstract: | Using administrative panel data on Norwegian investors' portfolios, we document strong but slow portfolio allocation responses to a persistent wealth-tax-induced shock to the equity premium. Short-run responses resemble the modest sensitivity documented using surveys. The longer-run responses are much larger and can be rationalized by moderate risk aversion. We document that equity premium shocks affect stock market entry but not exits, suggesting that entry costs dominate participation costs. Our finding of slow responses supports the asset-pricing literature that uses adjustment frictions to explain important asset-pricing puzzles, and has implications for optimal capital taxation when tax rates differ across assets. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2533 |
| By: | Murillo Campello; Guilherme Junqueira |
| Abstract: | Do tax subsidies prompt investors to take on risk? We address this question by looking at investors' responses to changes to the Qualified Small Business Stock (QSBS) program, which reduces capital gains taxes on startup investing. We do so under a framework in which some startup investors — venture capitalists (VCs) — combine outside funding with incentive-based compensation, while others invest their own funds. Using bunching, triple-differences, and matching designs that exploit industry eligibility, investment vintage, and holding-period requirements, we analyze data from 158 thousand investor–firm pairings over two decades. We identify strategic investment timing, with subsidies prompting bunching at tax-eligible holding-period thresholds. Most notably, when and where tax subsidies apply, VCs shift their project selection toward riskier ventures: they invest more in pre-commercial stage startups, become more likely to provide startups with their initial capital, and invest more in startups with pre-existing debt, while becoming less likely to co-syndicate their investments. Tax-subsidized VC-backed ventures show higher failure rates, but on the flip side, attain higher valuations at exit and are more likely to reach "unicorn status." None of these patterns are observed for comparable non-VC investors in startups exposed to the same tax subsidies. Our tests further show that tax incentives lead to reallocation toward more innovative industries, yielding more impactful patents. Our study is the first to show that tax policy can shift entrepreneurial financing toward riskier, more innovative, and valuable startups. |
| Keywords: | tax policy, venture capital, risk-taking, entrepreneurial financing, innovation |
| JEL: | G24 G23 H25 O31 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12776 |
| By: | Bergeaud, Antonin; Brouillette, Jean-Félix; de Lachapelle, Louis; Malgouyres, Clément |
| Abstract: | We study the repeal of France’s Taxe Professionnelle, a large and spatially dispersed local capital tax whose rates were set by nearly 35, 000 municipalities. Combining administrative data with a dynamic spatial general equilibrium model disciplined by reduced-form estimates of firms’ investment responses, we find that the reform raises real income per worker by 5.1% in the long run and worker welfare by 2.6% in consumption-equivalent terms, accounting for transition dynamics. Counterfactuals isolating the level and spatial dispersion of taxes reveal that reducing the level, which triggers capital deepening, drives the bulk of income gains. Removing spatial dispersion alone reduces income per worker but raises welfare, as spatial frictions and compensating differentials redirect activity from productive locations toward high-amenity destinations. |
| JEL: | H25 H71 E22 R58 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21367 |
| By: | Emre Kurt (Department of Economics, University of Insubria, Italy); Andrea Riganti (Department of Economics, University of Insubria, Italy) |
| Abstract: | This paper examines whether the 2011 Italian Fornero Pension Reform altered retirement behaviour among individuals approaching retirement age and whether household characteristics shaped responses to the reform. Using panel data from Waves 4 and 5 of the Survey of Health, Ageing and Retirement in Europe (SHARE), the analysis exploits variation in reform exposure across age cohorts and over time within a difference-in-differences framework with individual fixed effects. The results provide limited evidence that the reform substantially affected retirement and employment outcomes, although some estimates are consistent with delayed retirement and extended labour market participation. However, important heterogeneity emerges across household contexts. In particular, partnership status provides the strongest, albeit modest, evidence of heterogeneous responses to the reform. By contrast, there is little evidence that gender, number of children, caregiving responsibilities, health status, wealth, social support, or social security wealth systematically alter responses to the reform. These findings suggest that retirement behaviour is shaped not only by individual labour market incentives but also by household decision-making processes. More broadly, the results highlight the importance of considering household dynamics when evaluating the labour supply effects of pension reforms in family-oriented welfare systems such as Italy. |
| Keywords: | pension reform, family structure, retirement policy, household dynamics |
| JEL: | H55 J16 J26 D13 |
| Date: | 2026–07–02 |
| URL: | https://d.repec.org/n?u=RePEc:jrp:jrpwrp:2026-007 |
| By: | Denise DiPasquale; Edward Ludwig Glaeser; Adam M. Guren; Paul S. Willen |
| Abstract: | What information do policymakers need to design Pigouvian taxes or subsidies? Standard logic suggests that it is sufficient to know the size of the externality and unnecessary to know about quantities. Yet this logic is incorrect if interventions have fixed costs, taxes create deadweight losses, or there are distributional concerns. We present a model in which these considerations can make it more valuable for policymakers to learn about equilibrium quantities. We apply the model to congestion pricing, which has high fixed costs, and to a proposed housing subsidy in Boston that features deadweight losses and distributional concerns. |
| Keywords: | Pigouvian taxes; externalities; congestion pricing; Housing subsidies; tax abatement |
| JEL: | H23 H21 R52 |
| Date: | 2026–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedbwp:103475 |
| By: | Kevin E. Staub (Faculty of Business and Economics, University of Melbourne); Yuting Zhang (Melbourne Institute of Applied Economic and Social Research) |
| Abstract: | We provide the first separate estimates of the independent demand effects of Australia’s two main private health insurance (PHI) instruments: the Medicare Levy Surcharge (MLS), a tax penalty for uninsured higher-income individuals, and the PHI rebate, an income- and age-differentiated premium subsidy. Prior work estimated only bundled effects because the 2012 reform moved MLS and rebate thresholds jointly. We exploit the fact that rebate rates vary not just by income but, for given income, by age and over fiscal years, enabling separate GMM identification of MLS and rebate effects using linked administrative tax and Medicare data from the Person Level Integrated Data Asset (2010–2020). Our jointly estimated effects allow us, for the first time, to assess the relative importance of penalty and subsidy incentives on PHI demand and fiscal balance. We present counterfactual experiments assessing budget-neutral simultaneous changes to both instruments that raise population PHI coverage. Our estimates are directly applicable to recent proposals to equalise PHI rebate rates across age groups: qualising at the under-65 rate would reduce PHI take-up among older Australians modestly, with fiscal savings accruing primarily through reduced payments to infra-marginal existing policyholders. |
| Keywords: | private health insurance; tax-based penalty; rebates; Australia |
| JEL: | H51 I13 I18 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:iae:iaewps:wp2026n09 |
| By: | John A. List; Matthias Rodemeier; Sutanuka Roy; Gregory Sun |
| Abstract: | Behavioral interventions have become central to modern public policy, but their empirical promise remains contested because estimated treatment effects often appear small. We argue that a policy response is economically meaningful only relative to the response generated by alternative policies. We assemble more than 1, 200 estimates from over 600 studies comparing "nudges" and traditional price interventions in the markets for cigarettes, alcohol, influenza vaccination, electricity, and residential water. Translating nudge effects into equivalent price changes, we find that behavioral interventions often correspond to enormous fiscal interventions, from an 11% tax on electricity to a 100% subsidy on influenza vaccinations. Nudges are also more cost-effective than price instruments in all markets, but cost-effectiveness does not predict the welfare ranking of policies. Using a behavioral extension of the Marginal Value of Public Funds, we show that nudges have high welfare returns at the margin, while price instruments often generate larger total surplus at scale. |
| Keywords: | nudges, paternalistic taxes, welfare, energy efficiency, water conservation, influenza vaccination, cigarettes, alcohol consumption, RCTs |
| JEL: | D61 D83 H21 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12775 |
| By: | Masaya Yasuoka (School of Economics, Kwansei Gakuin University) |
| Abstract: | This paper examines the macroeconomic effects of universal basic income (UBI). Most social security benefits are provided only when certain eligibility conditions are met. By contrast, UBI provides a uniform payment to all households without imposing eligibility criteria or conditions for receipt. The results are as follows. In both the dynamic general equilibrium (DGE) model and the dynamic stochastic general equilibrium (DSGE) model, a positive UBI payment shock increases gross domestic product, and this effect persists even after the shock has dissipated. This finding suggests that UBI may have a growth-enhancing effect, primarily because it promotes capital accumulation. The results also show that the increase in gross domestic product is larger in the DSGE model than in the DGE model. This is because the presence of inflation encourages investment in real capital, thereby generating greater capital accumulation in the DSGE model than in the DGE model. |
| Keywords: | Basic Income, DSGE Model, Ramsey Model |
| JEL: | H23 E20 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:kgu:wpaper:312 |