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on Public Finance |
| By: | Gil S. Epstein (Bar-Ilan University); Ira N. Gang (Rutgers University) |
| Abstract: | In this paper we try to understand the phenomena whereby a large proportion of the population evades tax payments. We present a model which incorporates elements from the theory of information cascades with the standard model of tax evasion and analyze the connection between the decision of a potential tax evader, the number of tax evaders and the number caught in previous periods. General conditions exist under which any expected utility maximizing potential tax evaders will decide to emulate other tax evaders. |
| Keywords: | Tax evasion, Information Cascades, Uncertainty |
| JEL: | H26 H31 D82 |
| Date: | 2009–04–27 |
| URL: | http://d.repec.org/n?u=RePEc:rut:rutres:200902&r=pub |
| By: | Fershtman, Chaim; Lipatov, Vilen |
| Abstract: | People may express their political opinion by adopting different measures of civil disobedience. Tax compliance is an example of an economic decision that may be affected by anti-goverment sentiment. We consider a model in which political opinion as well as tax compliance decisions are both formed as part of a social interaction process in which individuals interact, exchange ideas and observe behavior. Tax compliance is affected by the level of government support and political opinion may be affected by government's auditing policy. The government's role is to set a social spending program which is viewed differently by rich and poor individuals. The paper focuses on the interdependence between tax compliance, government's social policies and political support, embedding this interdependence in a dynamic social interaction process. |
| Keywords: | political opinion; social interaction; tax evasion |
| JEL: | H26 H50 P16 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7554&r=pub |
| By: | Fatih Guvenen; Burhanettin Kuruscu; Serdar Ozkan |
| Abstract: | Wage inequality has been significantly higher in the United States than in continental European countries (CEU) since the 1970s. Moreover, this inequality gap has further widened during this period as the US has experienced a large increase in wage inequality, whereas the CEU has seen only modest changes. This paper studies the role of labor income tax policies for understanding these facts. We begin by documenting two new empirical facts that link these inequality differences to tax policies. First, we show that countries with more progressive labor income tax schedules have significantly lower before-tax wage inequality at different points in time. Second, progressivity is also negatively correlated with the rise in wage inequality during this period. We then construct a life cycle model in which individuals decide each period whether to go to school, work, or be unemployed. Individuals can accumulate skills either in school or while working. Wage inequality arises from differences across individuals in their ability to learn new skills as well as from idiosyncratic shocks. Progressive taxation compresses the (after-tax) wage structure, thereby distorting the incentives to accumulate human capital, in turn reducing the cross-sectional dispersion of (before-tax) wages. We find that these policies can account for half of the difference between the US and the CEU in overall wage inequality and 76% of the difference in inequality at the upper end (log 90-50 differential). When this economy experiences skill-biased technological change, progressivity also dampens the rise in wage dispersion over time. The model explains 41% of the difference in the total rise in inequality and 58% of the difference at the upper end. |
| JEL: | E62 H2 J24 J31 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15526&r=pub |
| By: | Florence TOUYA |
| Abstract: | Tax Interactions with Asymmetric Information and Nonlinear Instruments |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:tac:wpaper:9&r=pub |
| By: | Massimo Baldini; Daniele Pacifico |
| Abstract: | The aim of this paper is the study of three reforms of the Italian personal income tax that have been implemented over the past six years. The analysis is carried out in three stages. In the first stage we study their distributive effects using a static microsimulation model. In the second stage we focus on the labour supply effects by means of a structural microeconometric model of household labour supply; finally, we analyze the distributive effects of the reforms accounting for labour supply reactions. Our findings confirm that the extension of the no-tax area had positive effects in terms of both redistribution and work incentives, while greater benefits for households with children improved income distribution but with negative effects on the labour supply of married women, |
| Keywords: | microsimulation; labour supply; income distribution; income tax |
| JEL: | J22 H24 H31 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:mod:depeco:0611&r=pub |
| By: | Beetsma, Roel; Cukierman, Alex; Giuliodori, Massimo |
| Abstract: | The paper presents evidence of an upward ratchet in transfers and taxes in the U.S. around World-War II. This finding is explained within a political-economy framework involving an executive who sets defense spending and the median voter in the population who interacts with a (richer) agenda setter in Congress in setting redistribution. While the setter managed to cap redistribution in the pre-war period, the War itself pushed up the status-quo tax burden, raising the bargaining power of the median voter as defense spending receded. This raised the equilibrium level of redistribution. The higher share of post-War transfers may thus be interpreted as a delayed fulfilment of a, not fully satisfied, popular demand for redistribution inherited from the Great Depression. |
| Keywords: | agenda setter; ratchets; redistribution; taxes; transfers; World-War II |
| JEL: | E62 E65 N11 N12 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7501&r=pub |
| By: | Brittle, Shane (University of Wollongong) |
| Abstract: | This paper examines the growing gap between the theoretical and empirical growth literature and policy needs of the developing economies. Growth literature has focused mainly on long term growth outcomes, but policy makers of the developing economies need rapid improvements in the short to medium term growth rates; see Pritchett (2006). In this paper we argue that this gap can be reduced by distinguishing between the short to medium term dynamic effects of policies from their long run equilibrium effects. With data from Singapore, Malaysia and Thailand, we show that an extended version of the Solow (1956) model is well suited for this purpose. We find that the short to medium term growth effects of the investment ratio are quite significant and they may persist for up to 10 years. |
| Keywords: | Ricardian equivalence, fiscal policy, cointegration, structural breaks. |
| JEL: | E21 E62 C22 H62 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:uow:depec1:wp09-10&r=pub |