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on Public Economics |
| By: | Nakatani, Ryota; Miyamoto, Hiroaki |
| Abstract: | This paper studies the optimal tax-and-transfer policy when automation raises productivity but displaces unskilled workers. Using a general equilibrium model calibrated to the U.S. economy, we compute the steady-state social welfare-maximizing rate of each of four tax instruments: capital income taxation, unskilled wage taxation, taxation on automation capital (i.e., a robot tax), and consumption taxation. Following an increase in the productivity of automation-related capital, the welfare-maximizing capital income tax rate and robot tax rate are zero, as their long-run investment distortions outweigh their redistributive social benefits. In the baseline simulation, aggregate welfare is maximized by cutting the unskilled wage tax rate and, especially, the consumption tax rate. However, when unskilled labor and automation-related capital are highly substitutable, the optimal consumption tax rate increases, and the additional government revenue is redistributed to displaced unskilled workers. |
| Keywords: | Automation; Optimal Taxation; Capital Income Tax; Labor Income Tax; Consumption Tax; Robot Tax |
| JEL: | C68 E25 H21 H24 H25 O31 O40 |
| Date: | 2026–03–19 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128480 |
| By: | Adam M. 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: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:mcm:deptwp:2026-03 |
| By: | Nicolay, Katharina; Spix, Julia; Steinbrenner, Daniela |
| Abstract: | We conduct a data-based policy evaluation of the first large-scale, EU-wide excess profit tax, implemented during the 2022 European energy crisis to tax the windfall profits of inframarginal electricity producers. In particular, we evaluate the inherent trade-off of excess profit taxation: the benefits from generating additional tax revenues for crisis mitigation versus the costs of potential distortions to production and investment decisions. On tax revenues, our analysis indicates that the inframarginal revenue cap could cover almost one quarter of the crisis-related government support, although the distribution of tax revenues and thereby the cost coverage is highly uneven across EU Member States. On distortions, we distinguish between impact on long-run investment and short-run production decisions. While we find only a limited negative impact on profitability, which could discourage investment in the long run, we find, using a difference-in-differences design, that electricity producers slightly adapt their short-run production decisions to improve their profitability. Our conclusions help to guide policymakers in future supply shocks. Excess profit taxes only provide a beneficial cost-benefit perspective under specific conditions. Policymakers must carefully time the implementation and accurately identify excess profits. Even with a generous definition of profits, excess profit taxes can be distortionary and, hence, fail to be pure windfall taxes. While retroactive implementation could be an avenue to enhance the cost-benefit profile of excess profit taxes as a crisis measure, it may undermine the credibility and predictability of the tax framework. |
| Keywords: | Excess profit taxes, windfall profit taxes, inframarginal revenue cap, European electricity crisis, non-distortionary taxation, real effects of taxation |
| JEL: | H21 H23 H32 H12 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:340104 |
| By: | Matungulu T., Bienvenu; De Herdt, Tom; Kaghoma, Kamala C. |
| Abstract: | This study questions the �stylized fact� (Olken & Singhal, 2011) that informal taxes are redistributive yet regressive by analyzing the redistributive nature of informal taxes in the education sector in the DRC. Although it has been argued that informal taxes, like other indirect taxes, are regressive since they disproportionately affect low-income families, we f ind that informal taxes are progressively distributed in the case of education sector in the DRC, with the 20% richest households paying four-fifths of the total tax burden in the sector. Although being progressive in the income space, informal taxation cannot be considered �fair� or �equitable� however: the richer households are financing a disproportionally higher part of total education costs, both because children of poorer households drop out of school earlier and because richer households can pay for higher quality schools. The redistributive nature of informal taxes disappears after controlling for both effects. |
| Keywords: | informal taxes, progressivity/regressiveness, access, quality education, DRC, DR Congo |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:iob:dpaper:202502 |
| By: | Brun Lidia (European Commission - JRC); Stoehlker Daniel (European Commission - JRC); Pycroft Jonathan; Van't Riet Maarten |
| Abstract: | We assess the welfare implications of the Global Minimum Tax (GMT) on corporate income in a multi-country macroeconomic model. The objectives of the GMT are to mitigate harmful tax competition and to curb wasteful profit shifting. The theoretical literature suggests that the welfare effects of the GMT are ambiguous. It contributes positively to welfare by improving tax revenues and limiting profit shifting; however, it may also raise firms' capital costs, which dampens economic activity. Using our applied model, we combine all these effects to produce numerical results, creating what we believe is the first comprehensive welfare assessment of the GMT. We simulate the implementation of a GMT of 15 percent by all countries in our model, which are the 27 EU Member States, the US, the UK, Japan, and a tax haven. We estimate the welfare change in two scenarios. In the first, additional corporate income tax (CIT) revenues are redistributed as direct transfers to households. This produces mixed welfare results across countries, while the global welfare impact is slightly positive. In the second, additional CIT revenues are redistributed back to firms as lower CIT rates, provided that the rate remains at or above the GMT rate. Positive welfare outcomes are widely, though not universally, experienced, leading to a modest increase in global welfare. We find these results are robust to non-participation of the US. Finally, we investigate the impact of alternative GMT rates, finding that a 16 percent GMT rate yields the highest level of global welfare in our model. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:taxref:202504-02 |
| By: | Eric Gao; Daniel Luo |
| Abstract: | We study economies where consumers interact independently with many monopolists. When consumer valuations over goods are correlated, correlation can distort the induced distribution of consumer surplus (information rents). We identify which shifts in the correlation structure over values makes the induced distribution more or less fair, in the sense of second order stochastic dominance. We then investigate the role taxation can have on information rents, and show the tax authority never benefits from randomizing the allocation of goods. We characterize the set of mechanisms that are on the fairness-efficiency frontier under regularity conditions on the distribution of types. Furthermore, under these conditions all allocations on the fairness-efficiency frontier ration the good more than an unregulated monopolist. Finally, we discuss implications of our model for luxury commodity taxation. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.19044 |
| By: | Shahir Adnan; Ferrari Emanuele (European Commission - JRC) |
| Abstract: | This study evaluates the macroeconomic, environmental, and distributional effects of introducing a US$20 per tome 〖CO〗_2 tax on fossil fuels in Ethiopia. We employ a top-down macro–micro framework that links the DEMETRA computable general equilibrium model with the ETMOD tax–benefit microsimulation system to evaluate alternative revenue-recycling strategies, income-tax reductions, sales-tax cuts, and lump-sum transfers to households. The carbon tax reduces fossil-fuel emissions by 5.89% while causing a modest GDP decline of 0.17%, with carbon-intensive sectors, particularly transport and water, experiencing the largest contractions. Revenue recycling strongly influences outcomes: sales-tax reductions minimize GDP losses and are the only strategy that lowers poverty. The carbon tax would be regressive, but recycling its revenues makes it progressive, with sales-tax reductions yielding the greatest equity gains. The findings indicate that a carefully designed carbon tax, accompanied by an effective revenue-recycling strategy, can facilitate Ethiopia’s low-carbon transition, promote equitable outcomes, and safeguard vulnerable households. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:eapoaf:202603 |
| By: | Jacob, Gaidimlung K. (National Institute of Public Finance and Policy) |
| Abstract: | This paper investigates the flypaper effect in India s North-Eastern Region (NER), focusing on Manipur, a state marked by persistent structural dependence on central fiscal transfers due to geographic isolation, a narrow tax base, ethnic diversity, and historically embedded arrangements such as Special Category Status and concessional plan assistance. Despite successive fiscal reforms, the NER remains heavily reliant on intergovernmental transfers, raising concerns about fiscal autonomy and expenditure incentives. Drawing on fiscal federalism theory, the study tests whether subnational expenditure responds more strongly to central transfers than to equivalent increases in own revenue (the flypaper effect) and examines whether this asymmetry reflects costly local taxation as hypothesised by Hamilton (1986). The analysis uses annual data from 1987 2023 drawn from the Reserve Bank of India, Union Budget documents, and the Ministry of Statistics and Programme Implementation. Augmented Dickey Fuller and Engle Granger tests indicate that all variables are integrated of order one with no evidence of cointegration, justifying first-difference estimation. The first-difference log-linear Ordinary Least Square models reveal a pronounced and robust flypaper effect: central grants exhibit significantly larger expenditure response than own revenue across aggregate and disaggregated spending categories. Tax devolution also stimulates expenditure but with smaller magnitudes than untied grants, particularly for capital outlays. Fiscal deficits positively supplement expenditure, suggesting borrowing finances both current and investment spending. Extending the empirical specification to include fiscal effort as a proxy for Hamilton s (1986) costly taxation hypothesis yields statistically insignificant coefficients in the first-difference log log estimations, indicating the absence of disciplining effect of local tax mobilisation on expenditure growth. However, grant dependence negatively affects total expenditure growth, suggesting that entrenched reliance on transfers constrains long-run fiscal flexibility despite short-run stimulative effects from grant inflows. These findings highlight institutional constraints in fragile regions: while transfers sustain public provision amid weak own-revenue capacity, they crowd out incentives for mobilisation and perpetuate dependence, with implications for fiscal sustainability and decentralisation efficacy in developing federations. The pronounced flypaper effect in capital spending underscores transfers role in infrastructure financing but raises concerns about discretionary autonomy in politically complex settings. |
| Keywords: | Flypaper effect ; intergovernmental transfers ; fiscal federalism ; grant dependence ; North-Eastern India ; Manipur |
| JEL: | H77 H72 H50 R50 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:npf:wpaper:26/446 |
| By: | Eiji Yamamura; Fumio Ohtake |
| Abstract: | This paper examines the extent to which individual time preferences are associated with the willingness to accept different tax burdens. The first is an intertemporal redistribution in which a current consumption tax increase is exchanged for a proportional future reduction. The second is a contemporaneous redistribution where the tax burden borne by individuals is transferred directly to those with significantly lower incomes than their own. Using a cross-sectional online survey of approximately 12, 000 observations, we found through various regression analyses that higher time preference is negatively associated with acceptance in both domains. Crucially, the negative coefficient is larger in absolute value for contemporaneous redistribution than for the intertemporal one. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.15349 |
| By: | Lourdes Alvarez (Economic and Fiscal Policy Unit, United Nations Environment Programme); Braulio Escobar (Pontificia Universidad Católica del Perú) |
| Abstract: | This study examines two recent tax reforms in Peru aimed at fostering economic growth. A Dynamic Computable General Equilibrium (DCGE) model calibrated with 2023 data is employed to evaluate their macroeconomic and sectoral impacts. The results show that the Municipal Compensation Fund Law generates limited aggregate effects, with some notable exceptions: it tends to reduce the value added of the construction sector while increasing public expenditure on goods and services. In contrast, the New Agrarian Law stimulates agricultural and agro-industrial production, enhancing exports and value added. However, it slightly reduces tax revenues and public spending and produces negative spillover effects on sectors not directly benefiting from the reform. |
| Keywords: | Dynamic Computable General Equilibrium Model; Tax Reform; Fiscal Policy; Peru; Municipal Compensation Fund (FONCOMUN); New Agrarian Law |
| JEL: | C68 E62 H20 O23 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:rbp:wpaper:2025-015 |
| By: | Bucher-Koenen, Tabea; Wallossek, Luisa; Winter, Joachim |
| Abstract: | Default settings strongly increase pension enrollment, especially when savings incentives are high and choices are complex. We show that the effect is weaker when incentives are low, options are simple, and opting out is easy. We study the nationwide introduction of auto-enrollment for low income employees in Germany's public pay-as-you-go pension system. We find that automatic enrollment raises participation by 23 percentage points, though most individuals actively opt out. Linking administrative and survey data shows that the default effect is stronger when enrollment incentives are higher and among individuals who lack knowledge of their enrollment status. |
| Keywords: | Default-Setting, Auto-Enrollment, Pensions, Financial Literacy |
| JEL: | D14 H55 J26 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:340111 |