nep-pub New Economics Papers
on Public Finance
Issue of 2010‒08‒21
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. A Theory of Taxation and Incorporation By Christian Keuschnigg; Peter Egger; Hannes Winner
  2. Itemised Deductions: A Device to Reduce Tax Evasion By Piolatto, A.
  3. Does Income Taxation Affect Partners’ Household Chores? By Soest, A.H.O. van; Stancanelli, E.G.F.
  4. Climate Change and Carbon Tax Expectations By Hoel, Michael

  1. By: Christian Keuschnigg; Peter Egger; Hannes Winner
    Abstract: This paper provides a theory of incorporation and taxation that emphasizes the role of the corporate legal form in facilitating access to external capital and the potential advantages of limited liability. Incorporation relaxes financing constraints and makes corporations larger than comparable non-corporate firms. For the same reason, a tax on corporations imposes a smaller first order welfare loss than a tax on non-corporate firms. Shifting the tax burden from non-corporate to corporate firms raises welfare, justifying some double taxation of corporate profits under a classical system. We compare the role of taxes with other institutional reforms and discuss how the theoretical results of the paper can be tested empirically.
    Keywords: Incorporation, corporate tax, external capital, limited liability
    JEL: H25 H73 F23 C21
    Date: 2010–08
  2. By: Piolatto, A. (Tilburg University, Center for Economic Research)
    Abstract: Direct incentives and punishments are the most common instruments to fight tax evasion. The theoretical literature disregarded indirect schemes, such as itemised deductions, in which an agent has an interest in that other agents declare their revenue. Itemised deductions provide an incentive for consumers to declare their purchases, and this forces sellers to do the same. I show that, for any level of taxation, it is possible to increase tax proceeds by choosing the proper level of itemised deduction; the cost for the government on the consumers’ side is more than compensated by the extra proceeds on the sellers’ side.
    Keywords: Tax evasion;itemised deductions;substitutes goods;quantity competition
    JEL: H00 H20 H26 H30
    Date: 2010
  3. By: Soest, A.H.O. van; Stancanelli, E.G.F. (Tilburg University, Center for Economic Research)
    Abstract: We study the impact of income taxation on both partners‟ allocation of time to market work and unpaid house work in households with two adults. We estimate a structural household utility model in which the marginal utilities of leisure and house work of both partners are modelled as random coefficients, depending on observed and unobserved characteristics of the household and the two partners. We use a discrete choice model with choice sets of 2,401 points for each couple, distinguishing seven market work intervals and seven house work intervals for each partner. The model is estimated using data for France, which taxes incomes of married couples jointly, like, for instance, Germany and the US. We find that both partners‟ market and non-market time allocation decisions are responsive to changes in the tax system or other policy changes that change the financial incentives. Women‟s time allocation is more responsive to the own and the partner‟s wage rate than men‟s. Tax policy simulations suggest that moving from joint taxation for married couples to separate taxation of each spouse would go a small step in the direction of equalizing market and non-market work of spouses. Selective taxation with smaller tax rates for women than for men would magnify these effects.
    Keywords: time use;taxation;labour supply;discrete choice models
    JEL: J22 H31 C35
    Date: 2010
  4. By: Hoel, Michael (Dept. of Economics, University of Oslo)
    Abstract: If investors fear that future carbon taxes will be lower than currently announced by policy makers, long-run investments in greenhouse gas mitigation may be smaller than desirable. On the other hand, owners of a non-renewable carbon resource that underestimate future carbon taxes will postpone extraction compared with what they would have chosen had the policymakers been able to commit to the optimal tax path. If extraction costs rise rapidly as accumulated extraction rises, near-term emissions increase as a consequence of a downward bias in the expected future carbon taxes. Whether investments in greenhouse gas mitigation go up or down due to the expectation error depends on the time pro…le of the returns to the investment.
    Keywords: climate change; exhaustible resources; carbon tax
    JEL: H23 Q30 Q42 Q54
    Date: 2010–03–24

This nep-pub issue is ©2010 by Kwang Soo Cheong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.