the impact of mandatory disclosure laws on product choices an analysis of the salad dressing market abstract the nutrition labeling and education act nlea requires most food products to include a nutrition label prior to the nlea labeling was voluntary this study uses nutrition label information and supermarket scanner data pre and post nlea to examine the impact of moving from a voluntary to a mandatory labeling regime on consumer product choice the voluntary unraveling of information is shown to be an important market mechanism prior to the nlea all low fat salad dressings had a nutrition label while the majority of the higher fat dressings did not however there remained large variation in fat content among dressings that did not voluntarily label those with the highest fat levels experienced a significant decline in sales after they were required to disclose the results indicate that even in markets with credible low cost mechanisms to disclose mandatory labeling can have an impact on consumer behavior and health

reciprocity and willingness to pay taxes evidence from a survey experiment in latin america are citizens more willing to pay taxes when the government s performance improves we review the tax morale literature disentangling its different components and provide empirical evidence exploiting a novel survey conducted in seventeen latin american cities and an experimental attempt at measuring reciprocity in tax collection in developing countries the evidence suggests that governments interested in increasing tax revenues should not focus solely on escalating the coercive power of the state that is more audits and fines rather providing better public services to society can be an effective albeit limited tool to raise revenues

applications of behavioural economics to tax evasion the paper reviews recent models that have applied the techniques of behavioural economics to the analysis of the tax compliance choice of an individual taxpayer the construction of these models is motivated by the failure of the yitzhaki version of the allingham sandmo model to predict correctly the proportion of taxpayers who will evade and the effect of an increase in the tax rate upon the chosen level of evasion recent approaches have applied non expected utility theory to the compliance decision and have addressed social interaction the models we describe are able to match the observed extent of evasion and correctly predict the tax effect but do not have the parsimony or precision of the yitzhaki model

an economic analysis of tax amnesties abstract tax amnesties have frequently been justified as politically popular ways to generate increases in government revenue this paper examines the circumstances under which amnesties are likely to have a beneficial impact on revenue collections it concludes that while in general it may be correct to impose a reduced penalty on individuals who voluntarily disclose tax evasion shortlived amnesties of the type most frequently observed in practice are unlikely to generate genuinely additional revenue particularly when judged against the potential danger of reducing future tax compliance

inflation and tax evasion an empirical analysis this paper contains an analysis of the effect of inflation on aggregate tax evasion in the united states over the period 1947 81 it is found that tax evasion in both absolute and relative terms is positively related to the inflation rate further the results indicate that aggregate evasion has risen in both absolute and relative terms with increases in the marginal tax rate but has fallen with increases in the detection probability the penalty rate and the wage share of income finally evasion has risen in absolute terms but has fallen in relative terms when real true income has risen

from the lab to the field a review of tax experiments tax experiments have been gaining momentum in recent years although this literature dates back several decades with new developments in methods and data availability tax experiments have gradually moved away from lab settings and towards the field this movement from the lab to the field has happened against the background of the credibility revolution in applied economics which has seen more rigorous methods applied to policy relevant questions and of the availability to researchers of administrative data from tax returns these developments have allowed significant advances in the experimental literature on tax compliance this paper reviews this literature giving particular attention to field experiments using administrative data but putting them in the broader context of the compliance literature a particular effort is made to take a global perspective in a literature that is only recently seeing the emergence of evidence from africa latin america and asia

the informal sector in developed and less developed countries a literature survey the main goal of this study is two fold 1 to provide ageneral overview of the contributions to the literature on theinformal sector with a special focus on the public choiceapproach and 2 to compare these contributions across twoinstitutionally different types of countries developed andless developed developing and transition countries thepaper focuses on the criteria used to define the informalsector the relationship between the formal and informaleconomy tax evasion and public choice analysis it isstressed throughout this paper that the distinction betweenthe two types of countries is of key importance

tax effects versus budget effects on labor supply this paper analyzes the effects on labor supply of parallel changes in taxes and public spending of various types a number of important recent developments in the labor supply behavior of households are highlighted by such a study of various types of budget effects rather than isolated tax effects this comes out in particular when considering cross substitution effects on labor supply of changes in public spending on goods and services or of the subsidization of goods and services provided by private markets moreover the income effects of tax changes are often mitigated or possibly even removed by the income effects of the accompanying expenditure changes

culture compliance and confidentiality taxpayer behavior in the united states and italy the experimental economics center and the department of economics of the andrew young school of policy studies georgia state university atlanta ga and the center for experimental economics at fondazione university ca foscari italy

appliance ownership and aspirations among electric grid and home solar households in rural kenya in sub saharan africa there are active debates about whether increases in energy access should be driven by investments in electric grid infrastructure or small scale home solar systems e g solar lanterns and solar home systems we summarize the results of a household electrical appliance survey and describe how households in rural kenya differ in terms of appliance ownership and aspirations our data suggest that home solar is not a substitute for grid power furthermore the environmental advantages of home solar are likely to be relatively small in countries like kenya where grid power is primarily derived from non fossil fuel sources

the effect of standardized information on firm survival and marketing strategies we argue that standardized information disclosure information using a common format and uniform metrics creates asymmetric opportunities for firms which affects their strategies and survival we test our predictions using a longitudinal quasi experimental field study involving the nutrition labeling and education act of 1990 nlea and we focus on firm market share within a category as a key asymmetry findings indicate that in general the nlea had no effect on firm responses however when accounting for firm differences we observe that the nlea led to 1 an increase in small share firm exits and 2 a greater increase in distribution for large share firms no concurrent increase in price by large share firms following the nlea was observed we conclude by discussing the implications of these effects for firm strategy the design of public policy and theories regarding the impact of information on markets

an econometric analysis of income tax evasion and its detection this article presents an econometric analysis of income tax evasion and its detection based on individual level data drawn from the internal revenue service 1982 and 1985 taxpayer compliance measurement programs i specify a model consisting of two equations the first measures the extent of evasion the second the fraction of evasion detected the empirical analysis explores the effects of income the marginal tax rate and various socioeconomic characteristics on filer evasion behavior and it assesses the variability in detection rates among irs examiners finally i use the empirical estimates to construct new estimates of the income tax gap the new estimates are very close to the previous irs estimates

paying tax is part of life social norms and social influence in tax communications abstract a number of studies on taxpayer interaction from large scale surveys to field experiments reveal that people s tax compliance attitudes and behavior change after they discuss tax with other taxpayers however we know very little about the content of these communications and the processes by which they produce changes in tax compliance to address this knowledge gap we employed an in depth analysis of naturally occurring online discussions about income tax among software developers using a discourse analytic framework we report an empirical analysis of 120 online interactions between taxpayers providing a categorization of these interactions interactions ranged from asking for information about tax regulations and receiving such information to a variety of interactions aimed at persuading defiant individuals to comply with tax laws these persuasion techniques varied from stating the benefits of compliance to threats of severe economic and reputational consequences overall this study is the first in depth empirical investigation of social influence processes in taxpayer communication we discuss how the results inform research into social norms and tax compliance tax communication in social networks and persuasive messaging in tax compliance campaigns

individual morality and reputation costs as deterrents to tax evasion abstract empirical evidence suggests some taxpayers never evade evasion increases with the tax rate and evasion decisions are interdependent these findings are not easily explained by the existing theory which models evasion as an independently made amoral gamble this paper uses nonpecuniary costs of evasion to reconcile theory with evidence once individuals are assumed to differ by an honesty characteristic taxpayers dichotomise into groups the more honest of which responds to a tax change as the evidence suggests a further extension is to introduce an endogenous reputation cost this suggests a positive relationship between the number of evaders and the tax rate

sizing the government is there such a thing as an optimal government size we investigate the so called armey curve which claims an inverted u shaped relationship between government size and economic performance using non parametric data envelopment analysis dea the dea scores are linked to control variables such as initial per capita income openness population density urbanization country size and family size for 23 oecd countries we estimate the country specific efficiency scores which reveal the extent to which a country uses excess public resources to achieve the observed growth rate of gdp

regulatory performance of audit tournaments and compliance observability this paper examines the effectiveness of traditional regulatory schemes and newly emerging social information schemes for achieving compliance our experiment focuses on two stochastic audit schemes for enforcing regulatory compliance in the random audit mechanism firms are randomly chosen for inspection in the tournament audit mechanism the probability of inspection increases with the degree of estimated underreporting to study the effects of social information the experiment varies the observability of identity output and compliance decisions optimal output is theoretically independent of the auditing scheme but equilibrium reporting is higher under the tournament mechanism than random auditing experimental findings are broadly consistent with the theoretical predictions for reporting but deviate modestly for output in particular we find that average output is lower and reporting is higher in the tournament treatment compared to the random audit treatment at the individual level a majority of participants misreported in most periods social observability does not affect output or reporting significantly in either of the audit treatments

enforcement socioeconomic diversity and tax filing compliance in the united states in this article we examine the determinants of tax filing compliance in the united states we use county level data on non filing rates for the tax year 2000 obtained directly from the internal revenue service we include explanatory variables identified in the rational compliance framework including an enforcement index against identified non filers the audit rate of filers and the average penalty rate for both filers and non filers we also examine the role of socioeconomic diversity on tax compliance testing whether within county heterogeneity in household income language race and religion can help explain variation in non filing rates we find that non filing is increasing with heterogeneity by race although not by income or language and that non filing is decreasing with heterogeneity by religious membership as for enforcement variables we find that non filing rates tend to fall with the enforcement index other variables have somewhat mixed results

are we a nation of tax cheaters new econometric evidence on tax compliance the theoretical basis for the economic approach to tax compliance has at least until recently been inadequate and the limited empirical work based on it is seriously flawed in this paper we briefly review both as well as new theoretical and especially empirical work on the tax compliance problem with respect to the latter we present preliminary results based cm a state level time series cross section data set drawn in part from the annual reports of the commissioner of internal revenue

ambiguity about audit probability tax compliance and taxpayer welfare we show that an increase in uncertainty about the probability of being audited ambiguity increases tax compliance for ambiguity averse taxpayers but reduces compliance for ambiguity lovers because experimental evidence reveals considerable heterogeneity with respect to ambiguity preferences we conclude that fostering uncertainty about the probability of being audited may not be an effective policy for increasing taxpayer compliance moreover because the tax authority can neither categorize nor screen taxpayers on the basis of their preferences for ambiguity it is not likely to be either a useful or a desirable instrument for increasing taxpayer welfare jel h26 d81

why do people pay taxes prospect theory versus expected utility theory abstract using actual probabilities of audit and penalty rates the return on evasion is 91 98 so why do not most of us evade existing analysis based on expected utility theory eut is unable to explain this furthermore and contrary to intuition and the bulk of evidence eut predicts that evasion should be decreasing in the tax rate yitzhaki puzzle we apply tversky and kahneman s tversky a kahneman d 1992 advances in prospect theory cumulative representation of uncertainty journal of risk and uncertainty 5 297 323 cumulative prospect theory to tax evasion we show that prospect theory provides a much more satisfactory account of tax evasion including an explanation of the yitzhaki puzzle this also provides independent confirmation of prospect theory

income distribution and equilibrium multiplicity in a stigma based model of tax evasion abstract this paper incorporates continuous income distribution into the stigma based model of tax compliance the paper investigates the effect of income distribution on the existence of multiple equilibria and characterizes the conditions under which multiple equilibria emerge precisely multiple equilibria exist if taxpayer incomes are sufficiently homogeneous because the social coordination effect dominates the individual characteristics effect numerical simulations show that the main proposition is robust to allowing two step audit policies on the part of the tax agency under the presumption that the best or good equilibrium is selected whenever there are multiple equilibria as a byproduct the effect of various forms of tax reforms on the optimal two step audit policy the equilibrium compliance and fiscal revenue is analyzed

on the effects of enforcement on illegal markets evidence from a quasi experiment in colombia this paper studies the effects of enforcement on illegal behavior in the context of a large aerial spraying program designed to curb coca cultivation in colombia in 2006 the colombian government pledged not to spray a 10 km band around the frontier with ecuador due to diplomatic frictions arising from the possibly negative collateral effects of this policy on the ecuadorian side of the border this variation is used to estimate the effect of spraying on coca cultivation by regression discontinuity around the 10 km threshold and by conditional differences in differences the results suggest that spraying one additional hectare reduces coca cultivation by 0 022 to 0 03 hectares these effects are too small to make aerial spraying a cost effective policy for reducing cocaine production in colombia

the impact of mandatory trans fat labeling on product mix and consumer choice a longitudinal analysis of the u s market for margarine and spreads abstract the impact of changes in food labeling policy on food consumption depends on how market participants both firms and consumers react to the changes across all products in the market we investigate how both responded to the u s food and drug administration s 2006 rule mandating that the quantity of trans fat in food products be separately labeled on the mandatory nutrition facts panel across an entire differentiated product category using a longitudinal data set tracking both product offerings and consumer purchases in the market for margarine and spreads for over a decade we analyze how product mix and consumer purchase behaviors were influenced by the new regulatory requirement we find that the number of products bearing voluntary trans fat free labels increased after the labeling regulation was implemented however a large number of the newly introduced products exited the market within five years as a result the fda s 2006 rule had a stronger short run than long run effect on product offerings even after the introduction of additional trans fat free labeled products such products remained only a small percentage of margarine and spreads product offerings increasing from a pre regulation level of 2 3 of the market to a peak of 6 5 in 2007 before dropping to 3 1 by 2011 in addition to firm response we examine demand side reactions to the 2006 rule and find that consumers significantly increased their expenditures on trans fat free labeled products soon after the labeling changes were implemented increasing from about 1 2 of the market in 2001 to a peak of 5 9 in 2007 before returning to 1 8 in 2011 we further explore variations in responses across different demographic characteristics although long run effects are small the market for trans fat free labeled margarine and spreads settled into a new equilibrium with a somewhat higher level of products in the market than prior to the 2006 rule taking effect and a somewhat higher share of expenditures in the category overall our category wide analysis of both firm and consumer behavior indicates that the effects of the labeling policy change were smaller in the longer run in this market than would be indicated by an analysis of only new product introductions in response to the policy change

the causes of government expenditure growth a survey of the u s evidence abstract the growth of government budgets can be broken down into a institutional and institutional components the former component the familiar substitution income and population public goods tax sharing effects is estimated to contribute about two fifths of the growth of u s government spending the latter component rent seeking political redistributions bureaucracy and perceptual informational impedimentia is important too but an exact imputation cannot be asserted given the state of the art in empirical public choice theory the cross effects on spending of the growth of regulation and tax preferences or tax expenditures though interesting is not pursued

the optimal size of a tax collection agency the condition that characterizes the optimal size of a tax collection agency is derived and then given a simple interpretation in terms of excess burden the paper clarifies an earlier finding of sandmo which suggests that the optimal degree of enforcement is higher than a simple cost benefit calculation would indicate the appropriate condition is that at the margin the resource cost of increasing enforcement should equal the saving of excess burden due to the decline in exposure to risk the increased revenue gained from stricter enforcement does not enter the expression because it merely represents a transfer among the economy s identical agents

tax evasion and self insurance abstract this paper examines the effect of an increase in the tax rates on tax evasion in a model where taxpayers self insure against possible penalties the analysis shows that the effect depends on the marginal productivity of self insurance if the marginal productivity is not too small an increase in the tax rates leads to greater tax evasion and less tax compliance this result stands in contrast with the theoretical result in the literature but accords well with empirical findings

on income tax avoidance the case of germany abstract we present a micro estimate determining taxed income as a function of gross income and all major deduction options depending on household and asset categories it shows that tax savings strongly increase with increasing income resulting in an effective marginal tax rate 16 percentage points below the legislated one for the highest income groups this calls into question the intended distributional impact of progressive income taxation our estimate suggests aggregate income tax losses to the german fiscal authorities in the order of magnitude of 34 of wage and income taxes paid in 1983 relative to 1994 tax proceeds this percentage would amount to dm 105 b

third party product review and firm marketing strategy product reviews by third parties are growing in popularity this paper examines when and how a manufacturing firm should adapt its marketing strategies to such reviews for example should a firm receiving an unfavorable review reduce its price or adjust its advertising should a winning product of a product review e g editor s choice boost its advertising expenditure to spread the good news how should firms strategic responses to product reviews differ across different types of product reviews description vs recommendation and different advertising media the reviewer s publication vs other media we develop a theory to address these issues and derive firms optimal responses to product reviews under different product market review media conditions we show that firms should chooseadvertising rather thanprice as a strategic variable in response to product reviews when enough consumers value horizontal product attributes surprisingly we find that using a review endorsedadvertising format i e advertisements containing third party award logos to broadcast its victory can hurt the winning product of a product review also it is not necessarily wise for the winning products to boostadvertising expenditures to spread the good news data from two industries printers and running shoes are used to illustrate some of our findings

the effect of information on product quality evidence from restaurant hygiene grade cards this study examines the effect of an increase in product quality information to consumers on e rms choices of product quality in 1998 los angeles county introduced hygiene quality grade cards to be displayed in restaurant windows we show that the grade cards cause i restaurant health inspection scores to increase ii consumer demand to become sensitive to changes in restaurants hygiene quality and iii the number of foodborne illness hospitalizations to decrease we also provide evidence that this improvement in health outcomes is not fully explained by consumers substituting from poor hygiene restaurants to good hygiene restaurants these results imply that the grade cards cause restaurants to make hygiene quality improvements

disappointment and dynamic consistency in choice under uncertainty the central proposition of disappointment theory is that an individual forms expectations about uncertain prospects and that if the actual consequence turns out to be worse than or better than that expectation the individual experiences a sensation of disappointment or elation generating a decrement or increment of utility which modifies the basic utility derived from the consequence by incorporating a simple disappointment elation function into a model of individual choice many observed violations of conventional expected utility axioms including violations of savage s sure thing principle and the isolation effect can be predicted and defended as rational and dynamically consistent behaviour

the impact of restaurant calorie labels on food choice results from a field experiment i introduction in 2009 americans spent 42 of their food dollars on meals away from home morrison mancino and variyam 2011 consumers choose to eat outside the home for a variety of reasons but there is mounting concern that this spending pattern will have a detrimental effect on americans diet and overall health todd mancino and lin 2010 estimated that for each additional meal eaten away from home consumers ate an additional 134 calories by their estimation the average person will gain two pounds each year just by eating out one meal a week not only does food away from home tend to be higher in calories its nutrient quality pales in comparison to meals prepared in the home todd mancino and lin 2010 the combined increases in eating away from home and u s obesity overweight rates have caught the attention of policymakers in an effort to help promote healthier food choices several cities counties and states have passed or are considering legislation which would require nutrition labeling on restaurant menus cspi 2010 with the passage of the 2010 healthcare bill a standardized menu labeling system will soon be required in chain restaurants and vending machines across the country the labeling guidelines currently being set by the food and drug administration fda will take precedence over local labeling laws although the specific guidelines have not been released they were expected to be released by the end of 2011 but have still not been finalized to date it is probable that chain restaurants those with 20 or more outlets will be required to provide 1 calorie information for all menu items on all menus menu boards food tags and drive throughs 2 additional nutrition information for all menu items available upon request and 3 a statement of the recommended daily caloric intake 2 000 calories day for the average individual however vending machines will only be required to post calorie counts for all items fda 2011 while the literature on menu labeling in restaurants is growing large gaps in knowledge remain this research was designed to fill many of these gaps by explicitly calculating the value of information voi present in two types of calorie labels using data collected from a field experiment in which restaurant diners were unaware of the ongoing study the innovativeness of our approach can be seen by briefly surveying the existing literature on the topic past research on the effectiveness of nutrition labeling has been remarkably inconclusive both in grocery store see moorman ferraro and huber 2012 for a discussion and restaurant settings some studies concluded that providing nutritional information on restaurant menus lowers caloric intake e g milich anderson and mills 1976 roberto et al 2010 wisdom downs and loewenstein 2010 yet other studies found that the information has no effect e g elbel et al 2009 finkelstein et al 2011 harnack et al 2008 mayer et al 1987 schwartz et al 2012 even among studies finding an effect the size of the effect tended to be small for example balfour et al 1996 and yamamoto et al 2005 found that only a small proportion of consumers 16 and 29 respectively changed their menu item selection when presented with nutrition information importantly no previous studies have provided an estimate of the economic value of nutritional information on restaurant menus which could be used in a cost benefit analysis one of the primary weaknesses of previous research relates to external validity in particular many of the previous studies were conducted in artificial settings where participants were aware of the on going research the earliest studies on restaurant menu labeling were not actually conducted in restaurants but in laboratory or cafeteria settings balfour et al 1996 cinciripini 1984 harnack et al 2008 mayer et al 1987 milich anderson and mills 1976 roberto et al

efficient committed budget for implementing target audit probability for many inspectees strategic models of auditor inspectee interaction have neglected implementation details in multiple inspectee settings with multiple inspectees the target audit probability derived from the standard analysis can be implemented with sampling plans differing in the budgets committed to support them overly committed audit budgets tie up unneeded resources that could have been allocated for better uses this paper studies the minimum committed budget required to implement a target audit probability when i the audit sample can be contingent on red flags due to signals of inspectees private information e g from self reporting and ii the number of inspectees is large it proposes an audit rule called bounded simple random sampling srs which is shown to require no more committed budget to support than two other rules naturally generalized from the one to one analysis when the number of inspectees is large enough bounded srs is nearly as good as any efficient audit rule which demands the lowest committed budget necessary to implement the target audit probability the results offer insights on how audit sampling plans may be formulated to reduce inefficiency and what budget usage ratios should be expected accordingly

tax evasion and capital gains taxation this paper uses time series data to investigate how changes in capital gains tax rates affect taxpayer compliance it finds that a one percent increase in the marginal tax rate reduces voluntary compliance by between one half and one percent these results confirm the findings of previous studies based on individual household data they also suggest that at least one quarter of the observed capital gain realization response to changes in marginal tax rates is due to changes in reporting behavior rather than portfolio behavior this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

connective power solar electrification and social change in kenya summary market based rural electrification with solar energy is increasingly common in developing countries this article revolves around three main claims about solar electrification in kenya s unsubsidized market 1 the benefits of solar electrification are captured primarily by the rural middle class 2 solar electricity plays a modest role in supporting economically productive and education related activities but connective applications such as television radio and cellular telephone charging often receive a higher priority 3 solar electrification is more closely tied to increased television use the expansion of markets more rural urban communication and other processes that increase rural urban connectivity than to poverty alleviation sustainable development or the appropriate technology movement

on the path dependence of tax compliance abstract this paper presents experimental evidence that tax compliance is path dependent for given values of the audit probability and the fine for tax evasion we compare the income declaration of subjects who faced a change in one of the two parameters to that of subjects who experienced no such parameter change we show that past tax enforcement regimes continue to have an impact on current income declarations this finding may be explained by reference dependent preferences and it has important policy implications for instance legal transplants cannot be expected to reliably yield similar behavior in countries with different legal histories

testing for regret and disappointment in choice under uncertainty much of the experimental evidence concerning violations of von neumann morgenstern expected utility theory has been collected fr om experiments designed with conventional theory in mind and does not provide direct tests of alternative models such as regret theory and disappointment theory this paper reports and discusses recent evidence produced by an exp erimentspe cifically designed to test for the impacts of regret and disappointment and to indicate their relative importance copyright 1987 by royal economic society

is economics useful for public policy economists have always played an important role in major public policy debates even so i believe that the role of economists in these public policy discussions has often been misguided because it has typically relied upon best practices stated in the form of general guidelines or even universal principles however best practices are not best if the specific situation does not conform with the assumptions that underlie the advice so my first conclusion is a cautionary and negative one specific circumstances differ so profoundly across individuals firms markets countries and time that most any attempt to define best practices that apply in all circumstances will lead to profoundly misleading public policy recommendations however even if economics cannot identify the truth it can often identify a truth so my second conclusion is a more positive one economists should continue to develop multiple theories that inform public policies but we should also focus our efforts on identifying and testing the critical assumptions that drive the results of these theories recognizing that the validity of any assumptions will depend intimately on specific circumstances i illustrate these two main conclusions with specific examples from my own work i conclude with some best practices recommendations of my own recognizing the obvious irony of such an effort

income tax compliance in a principal agent framework previous analyses have modeled income tax evasion as a portfolio problem deriving the optimal consumption of the risky asset unreported income under the assumption of a fixed probability of detection the purpose of this paper is to examine some of these issues in tax compliance starting from a different set of assumptions in particular we compare alternative audit policies to the standard random audit policy we focus on an audit cutoff policy in which an agent triggers an audit if his or her reported income is too low and is not audited if reported income is sufficiently high this paper establishes two major results first random audit rules are weakly dominated by audit cutoff rules it can be shown given lump sum taxes and fines that these audit cutoff rules are the least cost policies which induce truthful reporting of income second the dominance of audit cutoff rules over random audit rules holds for lump sum as well as proportional taxation in fact the equilibrium consequences of the two are equivalent

the impact of public transfer expenditures on tax evasion an experimental approach abstract this paper outlines the methodology and results of an experiment undertaken to analyze primarily the impact of public sector transfer payments on tax evasion behaviour apart from the use of transfer payments further explanatory variables used were income expected auditing probability and perceived tax burden the influence of these variables on both the propensity to evade taxes and the extent of taxes evaded are investigated in an attempt to add more realism some innovative changes to the experimental approach were incorporated

tax evasion inflation and stabilization abstract this paper focuses on the public resort to tax evasion in developing countries as an adjustment tactic during economic downturn we show using a theoretical model of intertemporal consumption that tax compliance declines when current income declines expectations about future income improve or inflation rises we then apply the model empirically to the cases of argentina brazil and chile three countries which have long experience with tax evasion and inflation over the last 40 years and find confirmation

information cost and consumer choices of healthy foods this article examines whether or not a reduction in consumer search cost for nutritional information increases the probability that heterogeneous consumers will choose healthier food products empirical results from the ready to eat breakfast cereal rtec market confirm the conceptual analysis that lowering information cost via simplified nutritional labeling increases the healthfulness of consumer choices the healthfulness attribute weighs 28 44 more heavily in consumers decision making with simpler labeling systems on average introducing front of package labeling increased the probability of a consumer choosing a healthy rtec by 3 49 and reduced the probability of choosing an unhealthy rtec by 3 81 calories sugar saturated fat and sodium consumption decrease by 0 31 2 63 6 94 and 1 97 respectively fiber intake increases by 3 24 further results show that less educated and smaller households with less frequent purchases benefit the most from a reduction in information cost overall this article shows the potentially positive role that voluntary more convenient labeling could play in improving market and public health outcomes

relative consumption and tax evasion abstract relative consumption effects or status concerns that feature jealousy in the sense of dupor and liu 2003 boost consumption expenditure if consumption is financed by labour income such status considerations increase labour supply and hence the tax base a higher taxable income in turn can make tax evasion more attractive we show for various specifications of preferences that the tax base effect generally dominates consequently relative consumption effects tend to reduce tax evasion this is true irrespective of whether tax parameters are exogenous guarantee a balanced budget or are set optimally

why people pay taxes the case of the development levy in tanzania abstract this paper examines factors determining tax compliance behavior in local authorities in tanzania the case study is the poll tax locally named development levy the study finds support for the hypothesis that tax compliance is positively related to factors such as ability to pay the perceived probability of being prosecuted and the number of tax evaders known personally by the respondent oppressive tax enforcement harassment of taxpayers and discontent with public service delivery seem to increase tax resistance and may explain widespread tax evasion

can information costs affect consumer choice nutritional labels in a supermarket experiment this paper investigates whether information costs under currently regulated nutritional labeling prevent consumers from making healthier food choices we implement five nutritional shelf label treatments in a market level experiment these labels reduce information costs by highlighting and summarizing information available on the nutritional facts panel following a difference in differences and synthetic control method approach we analyze weekly store level scanner data for microwave popcorn purchases from treatment and control stores our results suggest that consumer purchases are affected by information costs implemented low calorie and no trans fat labels increase sales in contrast implemented low fat labels decrease sales suggesting that consumer response is also influenced by consumers taste perceptions a combination of these claims into one label treatment increases information costs and does not affect sales significantly

income tax evasion labour supply and the equity efficiency tradeoff abstract this paper is an attempt to incorporate tax evasion into the analysis of optimum income taxation a model of variable labour supply with tax evasion is used to derive supply functions for labour in regular and irregular markets given taxpayer behaviour the government chooses tax rates penalties and the probability of detection to maximize a utilitarian social welfare function the results consist in the derivation of a formula for the optimum marginal tax rate and a characterization of the factors determining the choice between the penalty rate and the probability of detection as instruments for the control of tax evasion

predictive analytics and the targeting of audits the literature on audit strategies has focused on random audits or on audits conditioned only on income declaration in contrast tax authorities employ the tools of predictive analytics to identify taxpayers for audit with a range of variables used for conditioning the paper explores the compliance and revenue consequences of the use of predictive analytics in an agent based model that draws upon a behavioral approach to tax compliance the taxpayers in the model form subjective beliefs about the probability of audit from social interaction and are guided by a social custom that is developed from meeting other taxpayers the belief and social custom feed into the occupational choice between employment and two forms of self employment it is shown that the use of predictive analytics yields a significant increase in revenue over a random audit strategy

audit state dependent taxpayer compliance theory and evidence from colombia we develop and analyze a dynamic model of individual taxpayer compliance choice that predicts audit state dependent taxpayer compliance by distinguishing between forward looking versus myopic versus naive behavior we then test experimentally the audit state dependent model by reporting the results from the first tax compliance experiment run in colombia we find that subjects compliance rates increase with greater enforcement we also find more novel results fine rates should be increased after an audit and nudging myopic individuals toward reporting a constant rather than a fluctuating proportion of income would benefit both the taxpayer and the tax authority jel h26 c91

the economics of taxpayer compliance there is now a great deal of evidence suggesting that tax evasion is fairly widespread throughout european and north american economies estimates of the so called black economy indicate that perhaps 10 per cent of economic activity in these countries has been driven underground in the attempt to evade payment of tax for a detailed survey see pyle 1989 chs 2 4

tax evasion and orders of risk aversion abstract the classic allingham and sandmo s journal of public economics 1 1972 323 338 portfolio choice approach to income tax evasion has been increasingly criticised because it requires an excess degree of risk aversion to explain the observed rate of tax compliance in this paper we argue that there may not necessarily be excess risk aversion and that the evidence can be explained by the distinction between orders of risk aversion as defined by segal and spivak journal of economic theory 51 1990 111 125 and considered in regard to the same problem of anomalous excess risk aversion in financial and insurance markets

the economics of renewable energy expansion in rural sub saharan africa accelerating development in sub saharan africa will require massive expansion of access to electricity currently reaching only about one third of households this paper explores how essential economic development might be reconciled with the need to keep carbon emissions in check the authors develop a geographically explicit framework and use spatial modeling and cost estimates from recent engineering studies to determine where stand alone renewable energy generation is a cost effective alternative to centralized grid supply the results suggest that decentralized renewable energy will likely play an important role in expanding rural energy access but it will be the lowest cost option for a minority of households in africa even when likely cost reductions over the next 20 years are considered decentralized renewables are competitive mostly in remote and rural areas while grid connected supply dominates denser areas where the majority of households reside these findings underscore the need to de carbonize the fuel mix for centralized power generation as it expands in africa

corruption tax evasion and the laffer curve in a corrupt tax administration a rise in tax ratesets off complicated strategic moves by both taxpayersand administrators it is shown that in somecircumstances this may bring about laffer likebehavior of overall tax revenue i e a higher taxrate results in smaller net revenue for thegovernment further a more intense tax effort byincreasing the number of returns audited may alsoreduce net revenues finally if tax and fine ratespositively influence the level of corruption in theadministration these outcomes become more likely

tax morale in latin america in the tax compliance literature there is a lack of empirical evidence on the degree of tax morale in developing countries as a novelty this paper focuses thus on latin america analysing tax morale as a dependent variable and searching for factors that systematically affect tax morale working with the two data sets latinobarometro and world values survey our findings indicate that there is a significant correlation between tax morale and the size of shadow economy furthermore people who said they knew have heard about practised tax avoidance have a significantly lower tax morale than others looking at individuals perception of reasons for tax evasion we found that the tax burden lacking honesty and corruption are seen as the main factors we observed a significantly lower tax morale in south america mexico than in the central american caribbean area furthermore trust in the president and the officials the belief that other individuals obey the law and a pro democratic attitude have a significant positive effect on tax morale

tax evasion and social interactions the paper extends the standard tax evasion model by allowing for social interactions in manski s manski c f 1993 identification of endogenous social effects the reflection problem review of economic studies 60 3 531 542 nomenclature our model takes into account endogenous interactions i e social conformity effects exogenous interactions i e fairness effects and correlated effects our model is tested using experimental data participants must decide how much income to report given individual and group tax rates and audit probabilities and given a feedback on the other members reporting behavior myopic and self consistent expectations are considered in the analysis in the latter case the estimation is based on a two limit simultaneous tobit with fixed group effects a unique social equilibrium exists when the model satisfies coherency conditions in line with brock and durlauf brock w a durlauf s n 2001b interactions based models in j heckman and e leamer eds handbook of econometrics 5 elsevier science b v 3297 380 the intrinsic nonlinearity between individual and group responses helps identify the model our results provide evidence of fairness effects but reject social conformity

tax evasion is not a gamble a report on two experiments abstract a tax evasion experiment and an equivalent gambling experiment indicate that contrary to the standard model of evasion tax evasion and gambling are quite different although the standard model provides a good basis for analysis of evasion

do students behave like real taxpayers in the lab evidence from a real effort tax compliance experiment we report on data from a real effort tax compliance experiment using three subject pools students who do not pay income tax company employees whose income is reported by their employer and self employed taxpayers who are responsible for filing and payment while compliance behavior is unaffected by changes in the level of or information about the audit probability higher fines increase compliance we find subject pool differences self assessed taxpayers are the most compliant while students are the least compliant through a simple framing manipulation we show that such differences are driven by norms of compliance from outside the lab

unintended nutrition consequences firm responses to the nutrition labeling and education act this paper investigates how firms responded to standardized nutrition labels on food products required by the nutrition labeling and education act nlea using a longitudinal quasi experimental design we test our predictions using two large scale samples that span 30 product categories results indicate that the nlea reduced brand nutritional quality relative to a control group of products not regulated by the nlea at the same time among regulated products brand taste increased although this reduction in nutrition represents an unintended consequence of regulation there were a set of category firm and brand conditions under which the nlea produced a positive effect on brand nutritional quality we find that firms were more likely to improve brand nutrition when firm risk or firm power is low lower risk occurs when the firm is introducing a new brand rather than changing an existing brand and weaker power in a category is reflected by lower market share in a category furthermore firms competing in low health categories e g potato chips or small portion categories e g peanut butter improved nutrition more than firms competing in high health categories e g bread or large portion categories e g frozen dinners recommendations for firm strategy and the design of consumer information policy are examined in light of these surprising firm responses

ambiguity made precise a comparative foundation the theory of subjective expected utility has been recently extended to allow ambiguity to matter for choice we propose a notion of absolute ambiguity aversion by building on a notion of comparative ambiguity aversion we characterize it for a preference model which encompasses some of the most popular models in the literature we next build on these ideas to provide a definition of unambiguous act and event and show the characterization of the latter as an illustration we consider the classical ellsberg 3 color urn problem and find that the notions developed in the paper provide intuitive answers journal of economic literature classification number d81

restructuring constructive processing of information displays in consumer choice this research examines the construction of information displays by consumers this aspect of constructive processing in which data may be transformed edited or inferred is termed restructuring subjects notes and verbal protocols generated during a study are used to examine restructuring behavior when making choices among brands these methods enable the examination of restructuring and its effect on evaluative processing throughout the course of making a choice results demonstrate that consumers do restructure that restructuring is done in a contingent opportunistic manner and that restructuring may influence the type of choice heuristic used e g alternative based vs attribute based

a fairness approach to income tax evasion abstract the tax that a taxpayer wishes to evade is determined on the basis of his perception of the fairness of his fiscal treatment with respect to both governmental supply of public goods and the perceived behaviour of other taxpayers the coercive powers of the state and the taxpayer s attitude toward risk determine the extent to which this desired level is undertaken in practice this approach is able to produce implications for the relationship between public expenditure tax rates and tax evasion which are more consistent with empirical evidence than the results of the conventional portfolio choice approach

quality standards versus nutritional taxes health and welfare impacts with strategic firms the goal of this paper is to better understand firms strategic reactions to nutritional policies targeting food quality improvements and to derive optimal policies we propose a model of product differentiation taking into account the taste and health characteristics of products we study how two firms react to alternative policies an mqs policy linear taxation of the two goods on the market and taxation of the low quality good the mqs and the taxation of the low quality product are the preferred options by a social planner if taste is moderately important the mqs policy is chosen by a populist and a paternalist social planner if taste is a major component of choice the populist planner chooses to tax the low quality product whereas the paternalist planner prefers the mqs policy finally for a paternalist social planner an mqs based policy always allows for higher levels of welfare than an information policy alone