you ve got mail a randomized field experiment on tax evasion we report from a large scale randomized field experiment conducted on a unique sample of more than 15 000 taxpayers in norway who were likely to have misreported their foreign income by randomly m

homeownership and economic performance of immigrants in germany this paper investigates the homeownership gap between native and immigrant households in germany paying particular attention to the assimilation process of immigrant households a double cohort model is derived which circumvents the identification problem for separating age period and cohort effects and accounts for differences in the effects the empirical findings suggest that immigrant households are less likely to own their primary residence than comparable native households moreover the duration of residence in germany does not affect the homeownership probability of immigrants indicating that an assimilation process in homeownership between native and immigrant households did not take place this result is largely consistent with the german immigration policy which has focused predominantly on short run economic needs and has neglected long run economic effects of immigration

analysis of the changing influences on traditional households ownership patterns abstract sociological and economic forces have begun to alter ownership patterns in ways not yet captured by movements in the aggregate ownership rate while demographic factors such as marital status and family structure remain influential in determining tenure choice their impact has waned particularly among the best educated households and those with rising real incomes labor market conditions as evidenced by increasing returns to skill are more strongly felt than ever before in the housing market the impact on owning of being highly educated now rivals the influence of being married with minor children increasingly delayed ownership is a reality even for traditional family units with 36 to 45 year old heads that have not prospered in the labor market the rising real cost of even relatively inexpensive suburban housing is also beginning to be reflected in a heightened impact for real family income on tenure choice finally race currently is more adversely influential in determining suburban ownership for young middle aged minority families than it was in 1960 particularly if the household head is not well educated we suspect this is due to racially disparate impacts of increasingly rigorous zoning regulations and higher impact fees in the suburbs

what went wrong with the recent reforms in the southern cone this paper describes and interprets the outcome of the reform packages in chile argentina and uruguay during 1974 83 it is shown that all three countries experienced initial success with the rescue operation from the severe macroeconomic disequilibrium at the inception of the reforms the paper then discusses the areas in which the reforms were successful and why the countries experienced boom bust cycles resulting in large increases in external indebtedness and internal financial crises the paper attributes the failure of the reforms to a combination of policy inconsistencies implementation difficulties and market frictions jointly these factors generated a sustained appreciation of the real exchange rate and a large spread between the cost of dollar denominated and peso denominated loans in turn the appreciation and interest rate difference created protracted opportunities for arbitrage that distracted firms from the business of production

voluntary disclosure of evaded taxes increasing revenue or increasing incentives to evade many countries apply lower fines to tax evading individuals when they voluntarily disclose the tax evasion they committed i model such voluntary disclosure mechanisms theoretically and show that while such mechanisms increase the incentive to evade taxes they nevertheless increase tax revenues net of administrative costs i confirm the importance of administrative costs in a survey of german competent local tax authorities i then test the effects of voluntary disclosure on the tax evasion decision using the introduction of the 2009 offshore voluntary disclosure program in the u s for identification the analysis confirms that the introduction of voluntary disclosure increases tax evasion

measuring racial discrimination with fair housing audits caught in the act a survey technique called a fair housing audit provides a direct measure of racial discrimination in housing this paper examines the econometric issues raised by audit data measures the discrimination uncovered by a 1981 boston study and tests hypotheses about the causes of discrimination the estimated level of discrimination is high black housing seekers are told about 30 percent fewer available housing units than are whites the hypothesis tests indicate that the primary cause of this discrimination is that housing agents illegally promote their economic interests by catering to the racial prejudice of their current or potential white customers

taking the high road compliance with commuter tax allowances and the role of evasion spillovers abstract this paper provides evidence of evasion in the context of a widely used commuter tax allowance and explores evasion spillovers as a determinant of the individual compliance decision for this purpose we exploit discontinuities in the commuter allowance scheme and employ a research design resting on a large panel of individual tax returns we find that around 30 of all allowance claims are overstated and consistent with deliberate tax evasion we observe sharp reactions of taxpayers to thresholds where the allowance discretely jumps to a higher amount further we use variation in job changes to uncover spillover effects from the work environment on the individual compliance decision these effects appear to be asymmetric job changers moving to companies with a higher fraction of cheaters increase their cheating in contrast movers to companies with a lower fraction of cheaters tend not to alter their reporting behavior we provide suggestive evidence that the spillover has more to do with an information environment but can ultimately not reject other behavioral explanations such as asymmetric persistence of norms

optimal redistribution and monitoring of labor supply this paper extends the mirrlees 1971 model of optimal non linear income taxation with a monitoring technology that allows the government to verify labor supply at a positive but non infinite cost we analyze the joint determination of the non linear monitoring and tax schedules and the conditions under which these can be implemented monitoring of labor supply reduces the distortions created by income taxation and raises optimal marginal tax rates possibly above 100 the optimal intensity of monitoring increases with the marginal tax rate and the labor supply elasticity our simulations demonstrate that monitoring strongly alleviates the trade off between equity and efficiency welfare gains of monitoring are around 2 8 of total output the optimal intensity of monitoring follows a u shaped pattern similar to that of optimal marginal tax rates our paper can explain why large welfare states optimally rely on work dependent tax credits active labor market policies benefit sanctions and work bonuses in welfare programs

duty fear and tax compliance the heuristic basis of citizenship behavior theory the costs imposed by income tax and other citizenship duties provide powerful incentives to free ride yet the likelihood of getting caught the primary self interested deterrent to free riding is unlikely to be known with much accuracy by most citizens thus the duty heuristic provides not only a direct motivation to comply but also influences behavior through cognitive processes that bias self interested beliefs about the advantages of free riding hypothesis citizens beliefs about their duty to obey laws of the state bias their information processing and judgements about the fear of getting caught and punished for disobedience so citizens reporting greater commitment to obey tax laws systematically overestimate the expected penalty for noncompliance methods regression analysis of survey and tax return data for 445 taxpayers results subjective risk of getting caught is more closely related to duty than to objective risk factors objective audit probabilities affect only taxpayers with greater temptation to cheat but duty influences tempted taxpayers as much as ordinary taxpayers

flexing muscle corporate political expenditures as signals to the bureaucracy when corporations and their employees spend money in the political arena to what extent are they purchasing special treatment complaints about the deleterious effects of corporate money in politics are ubiquitous in american political discourse however in order to pinpoint the place of these expenditures in american democracy and to appreciate fully the consequences of various reform proposals itiscriticaltoidentifytheprecisemechanism through which any preferential treatment might occur in this spirit scholars have suggested that corporations make political expenditures because they hope to influence government behavior through either explicit quid pro quos with legislators for constituency service or favorable votes baron 1989 grossman and helpman 1994 2001 improved access to legislators hall and wayman 1990 langbein 1986 or enhancement of the electoral prospects of sympathetic incumbents pooleandromer1985 empiricalevidenceverifying a definitive relationship between expenditures and specific policy change unfortunately has proven elusive in a recent review essay ansolabehere de figueiredo and snyder 2003 116 conclude contributions explain a miniscule fraction of the variation in voting behavior in the u s congress they suggest thatcontributionsarebetterthoughtofasconsumption goods that fulfill a desire to participate in politics than as investment in a political marketplace

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

devaluation and non traded goods in a labor migration model abstract in a three sector model with labor migration a devaluation which lowers non traded goods prices must raise labor s expected real wage as a group though in some sectors the real wage may fall ex post

who participates in tax avoidance evidence from swedish microdata abstractthis article empirically examines why not all individuals participate in tax avoidance we use rich swedish administrative panel data on all taxpayers with a link between corporate and individual tax returns and document that few individuals utilize legal and observable tax avoidance opportunities our results show that there are several frictions in tax avoidance participation in addition to monetary benefits from tax avoidance incentives the opportunity to participate in tax avoidance access as well as information and knowledge about these opportunities awareness are important factors for the individual s tax avoidance decision we further show that tax avoidance spreads within communities the impact of the local network is stronger for non commuters who live and work in the same municipality

fairness spillovers the case of taxation abstract it is standardly assumed that individuals react to perceived unfairness or norm violations in precisely the same area or relationship where the original offense has occurred however grievances over being exposed to injustice may have even broader consequences and also spill over to other contexts causing non compliant behavior there we present evidence that such fairness spillovers can incur large economic costs a belief that there is unfairness in taxation in the sense that the rich do not pay enough taxes is associated with a twenty percent higher level of paid absenteeism from work

a comparative analysis of the nativity wealth gap this paper investigates the source of the gap in the relative wealth posi tion of immigrant households residing in australia germany and the united states our results indicate that in germany and the united states wealth difierentials are largely the result of disparity in the educational attainment and demographic composition of the native and immigrant populations while income difierentials are relatively unimportant in understanding the nativity wealth gap in contrast the relatively small wealth gap between australian and foreign born households exists because immigrants to australia do not translate their relative educational and demographic advantage into a wealth advantage on balance our results point to substantial cross national disparity in the economic well being of immigrant and native families which is largely consistent with domestic labor markets and the selection policies used to shape the nature of the immigration ow

reducing evasion through self reporting evidence from charitable contributions abstract in absence of third party reporting taxpayers are required to self report information with various degrees of detail ranging from uncorroborated claims to comprehensive records with receipts using a quasi experimental design applied to noncash charitable contribution deductions i show that even basic self reporting requirements are effective at reducing evasion but impose large compliance costs on taxpayers i find that simplified reporting requirements reduce reporting costs by 55 per person and substantially increase claimed donations however half of the new donations are due to evasion thus information reporting should only be imposed on total reported donations above a pre specified threshold

caught in the housing bubble immigrants housing outcomes in traditional gateways and newly emerging destinations research has documented that immigrants have moved in large numbers to almost every metropolitan area and select rural areas in the us in the midst of these demographic shifts the country has experienced a profound recession to date there has been little research on the impact of the recession on immigrants across the us using 2006 and 2009 american community survey microdata the paper assesses how the recent economic crisis has affected latino and asian immigrants with respect to two housing outcomes homeownership and headship over two important time points in the recent economic cycle immigrants have worse housing outcomes and significantly lower mobility rates after the recession regression results suggest that the negative impacts from the recession are strongest in the gateway metropolitan areas and that after controlling for residence in the hardest hit areas increases in metropolitan level unemployment and mortgage delinquency rates have a negative impact on homeownership rates the results also suggest that even though the recession has disrupted immigrants upward trajectory in the housing markets the effect has not been as severe on immigrants as one might expect in particular the places where immigrant populations are newest have not experienced as large a reduction in homeownership as those in the large immigrant gateways even in the established gateways the decline in homeownership has been smaller for immigrants than for us born households

the effect of friendly persuasion and gender on tax comliance behavior friendly persuasion in contrast to deterrent measures like tax audits and penalties on underreported taxes is a positive and possibly a cost effective method of increasing taxpayer compliance however prior studies have failed to show that friendly persuasion has a significant impact on compliance blumenthal et al 2001 mcgraw and scholz 1991 in our study in contrast to prior studies we examine the impact of generating and reading reasons supporting compliance as friendly persuasion on individuals income reporting behavior as well as control for gender effects specifically we predict an interaction effect between friendly persuasion and gender on compliance behavior we carried out a 2 friendly persuasion and control 2 men and women full factorial experiment where participants earned 30 by completing two questionnaires participants in the friendly persuasion group were required first to generate and second to read a list of reasons why they should comply fully afterwards participants in both groups were asked to report the income they earned and pay tax on the reported income the results show a significant main effect for gender as well as a significant interaction effect between gender and friendly persuasion on income reported women in the friendly persuasion group reported significantly higher income compared to men in that group other comparisons were not significant policy implications for increasing taxpayers ethics and compliance are highlighted

just luck an experimental study of risk taking and fairness choices involving risk significantly affect the distribution of income and wealth in society this paper reports the results of the first experiment to our knowledge to study fairness views about risk taking specifically whether such views are based chiefly on ex ante opportunities or on ex post outcomes we find that even though many participants focus exclusively on ex ante opportunities most favor some redistribution ex post many participants also make a distinction between ex post inequalities that reflect differences in luck and ex post inequalities that reflect differences in choices these findings apply to both stakeholders and impartial spectators

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

international migration housing demand and access to homeownership in the uk since the mid 1980s the uk has experienced a prolonged period of net international migration with debate as to its impact on economic benefits and costs a third of projected new households in the next 15 20 years are expected to come from net migration this article examines international migration and housing demand in light of the conventional understanding of british housing markets and the extent to which there are differences in demand and access to homeownership across international migrant groups demographic and socioeconomic factors as well as length of residence are found to be significant determinants of homeownership however there are also differences in homeownership attainment that may be related to ethno cultural differences or unobserved wealth effects and mortgage market institutional factors the role of socioeconomic factors has implications for skills based migration to the uk if a policy concern is house price pressure and migration

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

ghostbusting in detroit evidence on nonfilers from a controlled field experiment abstract many people who owe income tax fail to file a timely tax return in communication with these ghosts what messages from the tax authority are effective for eliciting a return this is the first study to address message content in communication with income tax nonfilers i assess the efficacy of messages related to penalty salience punishment probability compliance cost and civic pride by evaluating the response to experimental mailings distributed by detroit to 7142 suspected resident nonfilers the penalty salience message was the most effective relative to a basic mailing that requested a return penalty salience mailings that stated the statutory penalty for failing to file a return tripled response rates from 3 to 10 compliance cost mailings that enclosed a blank tax return and punishment probability mailings that stated the recipient s federal income also raised response rates relative to the basic mailing but civic pride mailings did not i investigate the impact of treatment mailings on the behavior of untreated neighbors and find no evidence of geographic network effects

taxpayer response to an increased probability of audit evidence from a controlled experiment in minnesota abstract in 1995 a group of 1724 randomly selected minnesota taxpayers was informed by letter that the returns they were about to file would be closely examined compared to a control group that did not receive this letter low and middle income taxpayers in the treatment group on average increased tax payments compared to the previous year which we interpret as indicating the presence of noncompliance the effect was much stronger for those with more opportunity to evade in fact the difference in differences is not statistically significant for those who do not have self employment or farm income and do not pay estimated tax surprisingly however the reported tax liability of the high income treatment group fell sharply relative to the control group

mortgage lending in boston interpreting hmda data the home mortgage disclosure act was enacted to monitor minority and low income access to the mortgage market the data collected for this purpose show that minorities are more than twice as likely to be denied a mortgage as whites yet variables correlated with both race and creditworthiness were omitted from these data making any conclusion about race s role in mortgage lending impossible the federal reserve bank of boston collected additional variables important to the mortgage lending decision and found that race continued to play an important though significantly diminished role in the decision to grant a mortgage copyright 1996 by american economic association

the real exchange rate under various systems of international capital taxation international organizations such as the organization for economic co operation and development oecd and the european community ec have promoted to varying degrees the liberalization of capital movements among their member countries the code of liberalization of capital movements an agreement drawn in 1982 by the oecd sets different degrees of capital liberalization among its member countries depending on the nature of capital transactions e g direct or portfolio investment the treaty of rome 1957 recommended among other things the liberalization of capital movements among the ec countries chapter iv articles 67 72 by and large capital movements in the ec have been liberalized since 1990 the remaining restrictions in the capital markets of some member countries such as greece ireland portugal and spain were to be eliminated by the end of 1992 2 these developments in the world capital markets have prompted a renewed interest among trade theorists regarding the response of key economic variables e g national income employment and welfare to the liberalization of capital movements with capital becoming more mobile internationally capital flows in a country depend among other things on the domestic and the foreign capital tax rate and on the prevailing system of taxing net repatriated capital earnings in the capital exporting countries frequently capitalexporting countries tax the net repatriated capital earnings according to a system i of tax credits under which tax payments by foreign capital invested in a capital importing country are credited toward its tax liability to the source capital exporting country 3 ii of tax deductions under which

a dream deferred or realized the impact of public policy on fostering black homeownership in new york city throughout the 1990 s homeownership disparities between blacks and whites have been a persistent feature of american life for example in 1950 the black homeownership rate stood at 63 percent of the total homeownership rate and nearly a half century later in 1996 the black homeownership rate stood at 67 percent of the national homeownership rate u s bureau of the census 2001a although there may not be consensus among social scientists that housing discrimination continues to play a role in racial homeownership disparities a vast majority of social scientists would not dispute the historical role of housing discrimination and during the late 1980 s and 1990 s policymakers acted under the implicit assumption that discrimination was a driving force behind the black white disparities in homeownership this paper seeks to explore how policies of the 1990 s that were designed in part to combat mortgage lending discrimination affected black white homeownership disparities in new york city nyc because of its large presence of immigrants concentrating on nyc allows us to decipher the effects of nativity on homeownership moreover the u s bureau of the census 2001c conducted the new york city housing and vacancy survey nychvs of approximately 18 000 units in 1991 1993 1996 and 1999 which conveniently allows us to track homeownership trends over the 1990 s

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 can modern governments tax so much an agency model of firms as fiscal intermediaries we develop an agency model explaining why third party information reporting by firms makes tax enforcement successful while third party reporting would be ineffective with frictionless collusion between firms and employees collusive evasion is impossible to sustain in firms with many employees and accurate business records as any single employee may reveal evasion we embed our agency model into a macro model where the number of employees grows with development showing that the tax take evolves as an s shape driven by changes in third party information we show that our model is consistent with a set of stylized facts on taxation and development

taxes informality and income shifting evidence from a recent pakistani tax reform abstract this paper examines firm behavior to taxation in a low enforcement and large informality setting using quasi experimental variation created by a tax reform which increased taxation of partnerships substantially relative to firms of other legal form and the population of income tax returns filed in pakistan in 2006 11 i document that treated firms report significantly lower earnings migrate into informality and switch business form in response to the increase in tax rate the revenue loss caused by these behavioral responses is so large that by the third year after the reform the government was collecting less revenue than it would have without the tax increase this implies that the new tax rate was on the wrong side of the laffer curve and would not have been optimal under any social preferences the richness of the data and tax variation permits me to decompose the observed responses into real and evasion margins and to identify fiscal externalities created by the reform on other tax bases the welfare cost of the reform increases by around 40 once these externalities are taken into account

morality in the market abstract being honest can be a competitive disadvantage in markets with the opportunity to violate laws and regulations producers who are willing to cheat may crowd out more efficient producers who are honest and buyers who are willing to cheat may crowd out honest buyers with higher willingness to pay this mechanism makes morality honesty a bad substitute for sanctions in markets honesty reduces cheating but the output may be less efficiently produced and less efficiently allocated among buyers i also show that the effect of honesty depends crucially on the fraction of honest traders among both buyers and sellers while it does not matter whether a buyer or a seller pays the sanction it does matter who is honest

an econometric model of housing price permanent income tenure choice and housing demand abstract this paper addresses the determination of housing price permanent income tenure choice and housing demand full housing demand elasticities incorporate the interactive effects among the four stages of the model price and income have major effects in the tenure choice equation sociodemographic variables such as age have complex effects that may be lost in simpler forms of estimation

tariffs transfers and the real exchange rate the deviation of exchange rates from purchasing power parities ppp s has recently become the subject of theoretical and empirical attention the massive body of data collected and presented by the international comparisons project icp under the direction of kravis heston and summers khs 9 11 has permitted new empirical investigation of an old topic and has stimulated the construction of theoretical models to account for observed patterns in the icp project and the related literature the focus is on the ratio of the exchange rate to the ppp the concept of this ratio is closely related to the concept of the real exchange rate which is defined as the actual exchange rate multiplied by the ratio of an index of foreign prices to an index of domestic prices the term real exchange rate a term widely employed in both economics journals and in the financial press is frequently used to describe changes over time in a particular country and its calculation requires only time totime changes in exchange rates and price indexes the ratio of the exchange rate to the ppp on the other hand refers to a comparison of the levels of the exchange rate and the ppp at a moment in time and its calculation requires the availability of a ppp survey of the kind performed by the icp the purpose of the present paper is to analyze the effects of tariffs and transfers on the real exchange rate of a small country in this theoretical endeavor we shall hold constant the prices in foreign countries in this context it can easily be seen that the real exchange rate and the ratio of the exchange rate to the ppp are identical concepts provided that the expenditure weights used in the index of domestic prices are the same as those used in the calculation of the ppp

overview and summary this symposium analyzes the recent liberalization and stabilization attempts in chile argentina and uruguay attempts remarkable for their speed and coverage to bring these analyses together in one volume seems natural because the three experiences were so similar all three countries started with highly protected economies inflation balance of payments crises widespread government intervention and production systems in considerable disarray all three countries launched liberalization policies that spanned commodity and factor markets and all three followed the same path toward stabilization the battle against inflation was first based on control of the money supply then the exchange rate was used to reduce inflationary expectations the initial results were as remarkable as the reforms inflation was reduced fiscal deficits were controlled and growth was restored but in the early 1980s all three countries were again in crisis the objective of the reforms was to realize the gains from better allocations of resources and investment this objective was to be achieved by moving to market regulated economies one intention was to eliminate the traditional bias against exports and thus to spur the growth of exports which required an increase in the effective exchange rate for exportables and a decrease in that for import competing sectors a second intention was to deregulate interest rates and foreign capital inflows and thus to provide more credit to activities with the highest returns the motive here is to draw the lessons for other developing countries confronting liberalization and stabilization problems why did these unusual experiments fail to what extent did various parts of the packages succeed or fail was the failure due to external events or to bad policies were the institutional arrangements for deregulation appropriate the introduction to part i presents some analytical issues that arise from the experiences of the three countries it addresses the general issue of opening an economy to trade and to flows of foreign capital and the related issues of sequencing and policy coordination it also explores differences in the speed of adjustment in labor and commodity markets and the implications of these differences for the design of macroeconomic policy the other papers in part i explain and evaluate the macroeconomic performance of the liberalization and stabilization policies in each country first each paper describes the reforms and in an appendix provides a chronology of the many reforms perhaps the place to start for the uninitiated reader the descriptions are accompanied by summaries of the authorities intentions when the reforms were launched the approach to implementation is also addressed when it gave rise to policy reversals and conflicting signals second the papers construct stylized analytical frameworks to help interpret the macroeconomic outcome of the liberalization and stabilization policies in each country these frameworks help to draw the stylized outcomes of the reforms the papers in part ii rely on financial statements to analyze the adjustments by firms the data span the period covered by the reforms in each country and provide the basis for simple statistical models groups of firms exporters vs

unwilling or unable to cheat evidence from a tax audit experiment in denmark this paper analyzes a tax enforcement field experiment in denmark in the base year a stratified and representative sample of over 40 000 individual income tax filers was selected for the experiment half of the tax filers were randomly selected to be thoroughly audited while the rest were deliberately not audited the following year threat of audit letters were randomly assigned and sent to tax filers in both groups we present three main empirical findings first using baseline audit data we find that the tax evasion rate is close to zero for income subject to third party reporting but substantial for self reported income since most income is subject to third party reporting the overall evasion rate is modest second using quasi experimental variation created by large kinks in the income tax schedule we find that marginal tax rates have a positive impact on tax evasion for self reported income but that this effect is small in comparison to legal avoidance and behavioral responses third using the randomization of enforcement we find that prior audits and threat of audit letters have significant effects on self reported income but no effect on third party reported income all these empirical results can be explained by extending the standard model of rational tax evasion to allow for the key distinction between self reported and third party reported income

homeownership in the 1980s and 1990s aggregate trends and racial gaps abstract housing policy under the clinton and bush administrations has sought to boost homeownership while also narrowing racial gaps in owner occupancy rates against that backdrop homeownership rose sharply in the 1990s but white minority gaps remain in excess of 25 percentage points we analyze these patterns using data from the 1983 to 2001 survey of consumer finances results indicate that household characteristics explain most of the increase in homeownership and roughly two thirds of the white minority homeownership gap credit barriers account for no more than 5 percentage points of the remaining gap this suggests that policy makers will need to look beyond innovations in mortgage finance if their goal is to further expand homeownership

the decline of the immigrant home ownership advantage life cycle declining fortunes and changing housing careers in montreal toronto and vancouver 1981 2001 in the past working age immigrant families in canada s large urban centres had higher home ownership rates than the canadian born over the past 20 years however this advantage has reversed due jointly to a drop in immigrant rates and a rise in the popularity of home ownership among the canadian born this paper assesses the efficacy of a fairly standard microeconomic consumer choice model which includes indicators for age income education family type and immigrant characteristics plus several interactions with time to explain these changes it is found that the standard model almost completely explains the immigrant homeownership advantage in 1981 as well as the rise in home ownership rates over time among the canadian born even after accounting for the well known decline in immigrant economic fortunes however it is shown that only about half of the 1981 2001 immigrant change in homeownership rates is explained by the standard model

bunching at the kink implications for spending responses to health insurance contracts abstract a large literature in empirical public finance relies on bunching to identify a behavioral response to non linear incentives and to translate this response into an economic object to be used counterfactually we conduct this type of analysis in the context of prescription drug insurance for the elderly in medicare part d where a kink in the individual s budget set generates substantial bunching in annual drug expenditure around the famous donut hole we show that different alternative economic models can match the basic bunching pattern but have very different quantitative implications for the counterfactual spending response to alternative insurance contracts these findings illustrate the importance of modeling choices in mapping a compelling reduced form pattern into an economic object of interest

feasible smooth income tax schedules benefits and distributional implications existing tax schedules are often overly complex and characterized by discontinuities in the marginal tax burden in this paper we propose a class of progressive smooth functions to replace persona

optimal tax administration abstract this paper sets out a framework for analyzing optimal interventions by a tax administration one that parallels and can be closely integrated with established frameworks for thinking about optimal tax policy its key contribution is the development of a summary measure of the impact of administrative interventions the enforcement elasticity of tax revenue that is a sufficient statistic for the behavioral response to such interventions much as the elasticity of taxable income serves as a sufficient statistic for the response to tax rates among the applications are characterizations of the optimal balance between policy and administrative measures and of the optimal compliance gap

tariffs terms of trade unemployment and the real exchange rate the less developed countries ldcs have been subjected to major exogenous shocks and drastic domestic policy changes in recent years these shocks include changes in the terms of trade and or a policy shift away from the pervasive protectionism of the previous decades the implementation of trade liberalization programs is likely to follow in many more developing countries a large body of theoretical and empirical literature has developed which attempts to analyze the consequences of these changes utilizing models which explicitly incorporate the main structural and institutional characteristics of the ldc economies the behavior of the real exchange rate defined in various ways but most commonly as the relative price of tradeables to non tradeables has been identified as being of central analytical and policy importance while the literature on this subject recognizes the key link between the real exchange rate and domestic wages the analytical models used generally suffer from serious limitations in terms of their characterization of the labor markets the models used in the literature can be categorized into two groups a flex price models that give rise to full employment and b models that assume full or partial wage rigidity thereby generating some form of unemployment conventional wisdom suggests that a rise in import tariffs or an improvement in the terms of trade would always lead to an appreciation of the real exchange rate however it is shown by clague 3 and edwards and van wijnbergen 11 that the above result does not necessarily hold in more general models however these analyses were restricted to models with flexible wages wage rigidity is often ascribed to the existence of some form of wage indexation or other forms of government inter

household tenure choice and migration abstract a model of the joint tenure choice and migration decision is estimated unlike previous work that has considered each decision separately or examined the premigration tenure status choice jointly with the migration decision this analysis addresses change in tenure status as well the empirical findings indicate that variables often thought to affect either or both tenure status of the residence location change decision have offsetting or augmenting effects on their joint probabilities which are masked if the decisions are examined independently

consequences of a commodity boom in a controlled economy accumulation and redistribution in kenya 1975 83 the economic theory of dutch disease is extended and applied to the 1976 79 coffee boom in kenya in this article when a commodity boom is perceived as temporary a large fraction will tend to be saved out of transient income the spending effect of the boom is supplemented by relative price changes resulting from capital stock increases in the presence of foreign exchange and import controls the benefits of a sudden export price increase may be transferred intersectorally using a general equilibrium model it is estimated that in kenya the benefits of the boom were largely transferred from coffee growers to urban groups

cheating ourselves the economics of tax evasion no government can announce a tax system and then rely on taxpayers sense of duty to remit what is owed some dutiful people will undoubtedly pay what they owe but many others will not over time the ranks of the dutiful will shrink as they see how they are being taken advantage of by the others thus paying taxes must be made a legal responsibility of citizens with penalties attendant on noncompliance but even in the face of those penalties substantial tax evasion exists and always has the history of taxation is replete with episodes of evasion often notable for their inventiveness during the third century many wealthy romans buried their jewelry or stocks of gold coin to evade the luxury tax and homeowners in eighteenth century england temporarily bricked up their fireplaces to escape notice of the hearth tax collector webber and wildavsky 1986 p 141 this essay reviews what is known about the magnitude nature and determinants of tax evasion with an emphasis on the u s income tax alm 1999 andreoni erard and feinstein 1998 and slemrod and yitzhaki 2002 offer more comprehensive recent reviews of the literature it then places this information into a conceptual and policy context

walking inside the potential tax evader s mind tax morale does matter we conduct an empirical study on the determinants of the psychological costs of tax evasion also known as tax morale as a preliminary step we build a model of tax evasion including non monetary considerations show the relationship between tax compliance and tax morale in the empirical analysis of tax morale we find using a binomial logit model that the justification of tax evasion can be explained by the presence of grievance in absolute terms those who feel that taxes are too high those who feel that public funds are wasted and those who accept underground economic activities and grievances in relative terms the suspected level of others tax evasion the sense of duty and the level of solidarity are also relevant factors but to a lesser extent

social capital and the dynamics of trust in government it is well understood that trust in government responds to the performance of the president congress and the economy despite improved government performance however trust has never returned to the levels witnessed in the 1950s and 1960s social capital may be the force that has kept trust low if so we need to assess the relative contributions of both government performance and social capital at the macro level using macrolevel data the analysis here is designed to capture the variation over time in both social capital and government performance and let them compete to explain the macro variation in trust the empirical results demonstrate that both government performance and social capital matter but that social capital appears to be the force which accounts for the decline in trust over the last 40 years

the individual political economy of federal tax policy public policies are the product of conflicting demands within society these demands are both collective in nature and the product of individual interests individuals must balance these conflicting interests in developing their policy preferences we estimate the role of collective and individual interests in preference formation using tax policy as a substantive example survey data are used to estimate the model for evaluations of several tax policies debated during consideration of the 1978 tax revenue act our analysis indicates that individual preferences for tax policies are greatly affected by attitudes towards collective issues particularly redistribution attitudes and by self interest considerations we also find that aggregate variables measuring individuals local economies have significant effects on symbolic and selfinterest preferences

contrasting rational and psychological analyses of political choice we contrast the rational theory of choice in the form of expected utility theory with descriptive psychological analysis in the form of prospect theory using problems involving the choice between political candidates and public referendum issues the results showed that the assumptions underlying the classical theory of risky choice are systematically violated in the manner predicted by prospect theory in particular our respondents exhibited risk aversion in the domain of gains risk seeking in the domain of losses and a greater sensitivity to losses than to gains this is consistent with the advantage of the incumbent under normal conditions and the potential advantage of the challenger in bad times the results further show how a shift in the reference point could lead to reversals of preferences in the evaluation of political and economic options contrary to the assumption of invariance finally we contrast the normative and descriptive analyses of uncertainty in choice and address the rationality of voting

on the external validity of laboratory tax compliance experiments i introduction laboratory methods are now widely accepted as a methodological approach in economics and increasingly they have been used to examine specific public policy issues there is much to be gained from careful laboratory experiments they offer a low cost means of testing and replicating policy innovations and they generate precise data on individual behavior thereby allowing estimation of behavioral responses importantly they allow many policy innovations to be introduced singly and exogenously in a controlled environment and as a result laboratory experiments are typically seen as having a high degree of internal validity brewer 2000 campbell and stanley 1966 shadish cook and campbell 2002 because the causal relation between variables can be properly demonstrated however as emphasized by plott 1987 using laboratory experiments can allow more general inferences regarding human behavior only when the setting implemented in the laboratory parallels what is observed in the naturally occurring world even beyond this requirement of parallelism is the need for generalizing behavioral observations from the laboratory to the field or external validity internal validity can be demonstrated through the evaluation of the design however external validity can only be verified empirically and only with respect to the specific setting being investigated this paper investigates the external validity of laboratory experiments and does so in the context of experiments on tax compliance behavior tax evasion is central to many important policy questions current estimates report the tax gap or difference between taxes owed and taxes paid in the united states to be 450 billion annually internal revenue service 2012 beyond these massive revenue losses evasion creates major misallocations in resource use when individuals alter their behavior to cheat on their taxes its presence requires that government expend resources to detect noncompliance to measure its magnitude and to penalize tax evasion evasion alters the distribution of income in arbitrary unpredictable and unfair ways and it may contribute to feelings of unjust treatment and disrespect for the law more broadly it is not possible to understand the true impact of taxation without recognizing the existence and the effects of tax evasion laboratory methods have been used to examine a wide range of policies that may affect the compliance decision policies that have not always proven amenable to either theoretical analyses or empirical analyses with field data however laboratory studies of compliance are sometimes viewed with skepticism the most common criticism is that the student subjects typically used in experiments may not be representative of taxpayers undergraduates may have little experience with filing tax returns and their economic and demographic backgrounds may differ from those of taxpayers another criticism is that the context of laboratory compliance experiments does not closely enough resemble the context in which actual compliance decisions are made as a result there is a concern that experimental results on policy innovations that rely upon student subjects in laboratory compliance experiments cannot be generalized to the population it is this issue that we examine here building on previous research we present several types of evidence on the external validity of experiments on individual compliance decisions a first question examines whether behavior of laboratory participants is replicated by behavior of individuals making a similar decision in the naturally occurring world that is do participants in laboratory experiments exhibit different patterns of behavior than individuals in a similar naturally occurring setting to answer this question we utilize a special data set from the u s internal revenue service irs assembled as part of its national research program nrp

risk based pricing and the enhancement of mortgage credit availability among underserved and higher credit risk populations this paper estimates an option based hazard model of the competing risks of fha mortgage termination results indicate that the elevated default risks of loans originated among lower credit quality and minority borrowers are more than offset by the damped prepayment speeds of those loans so as to result in markedly lower loan termination probabilities among underserved borrower groups those damped termination risks translate into sizable reductions in risk premia to investors in simulated lower creditquality mortgage pools empirical findings suggest that such pooling and risk based pricing of fha insured mortgages could serve to substantially reduce housing finance costs among underserved borrowers so as to advance both their homeownership opportunities and related federal housing policy objectives

export to elude abstract how does domestic value added tax vat reform affect firms export we address this question via a model in which firms choose their sales for the domestic and foreign markets optimally the model predicts that strengthening domestic tax enforcement has a negative effect on domestic sales but a positive effect on exports when firms face a convex production cost function we test the model predictions using detailed firm and product level data from chinese industrial surveys and customs records our empirical analyses rely on china s golden tax project which is an information technology introduced in 2001 2002 that dramatically reduces the cost of vat enforcement we find that after the adoption of the technology by the government firms located far from local tax offices face a larger increase in their effective vat rates than those located nearby the enforcement effect and the former increase their export more than the latter the elusion effect we also find that the elusion effect is stronger for firms subject to higher export rebates or more severe financial constraints

reported gross income and marginal tax rates estimation of the behavioural reactions of spanish taxpayers this article estimates for the spanish personal income tax the elasticity of reported gross income to marginal tax rates the identification of this elasticity has been performed using the reform approved by law 35 2006 which came into force in january 2007 the elasticities obtained suggest the existence of important efficiency costs with significant regional differences the average elasticity estimated for spain as a whole is 0 676 however this elasticity is highly dispersed throughout the spanish administrative regions which indicates the unequal power of distortion of the tax thus households whose principal source of income is salary display an elasticity of 0 337 compared to 0 682 for households whose main income source comes from business or savings lastly a positive correlation is also detected between elasticity and income level an elasticity of 3 6 is reached for taxpayers with an annual gross income exceeding 100 000

do treatment decisions depend on physicians financial incentives we study whether and how physicians respond to nancial incentives making use of detailed register data on the health care services provided to patients by general practitioners gps in norway over a six year period 2006 11 to identify gps treatment responses we exploit that specialisation in general medicine entitles the gps to a higher consultation fee implying a change in total and relative fee payments to control for demand and supply factors related to becoming a specialist we estimate a gp fixed effect model focusing on a narrow time window around the date of specialist certi cation our results show a sharp response by the gps immediately after obtaining specialist certi fication and thus a higher consultation fee the number of visits increase while the treatment intensity prolonged consultations lab tests medical procedures decline these fi ndings are consistent with a theory model where partly profit motivated gps face excess demand and income effects are sufficiently small finally we find no evidence for adverse health effects measured by emergency care centre visits on patients due to the change in gps treatment behaviour after becoming a specialist

why are hispanic and asian american homeownership rates so low immigration and other factors abstract the homeownership rates of hispanic and asian american households are significantly less than that of other demographic groups in the us especially after accounting for income and other characteristics this naturally leads to an investigation of the impact of immigration characteristics of various groups on the propensity for homeownership it is found that being an immigrant has a substantial negative effect on the probability of being a homeowner but that this effect dissipates over time the relative youth of these two groups in and of itself plays a significant role in lowering their homeownership rate as does the relatively high rate of residence in areas with high value rent ratios

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

trust and taxpaying testing the heuristic approach to collective action theory trust is a critical attitude that extends the duty heuristic developed in scholz and pinney 1995 the trust heuristic can provide the basis for a contingent compliance strategy capable of sustaining cooperative solutions to collective action problems of governance if two conditions are met first compliance with laws must be conditional on levels of trust in specific legal arenas second a citizen s trust in government and trust in other citizens willingness to obey the law must reflect the costs and benefits associated with obeying laws hypothesis this article tests the first hypothesis in the tax arena trust in government and in other citizens increase compliance over and above the levels expected from an internalized sense of duty to obey laws and the fear of getting caught by enforcement agencies like the irs method we test the hypotheses with regression analysis of survey and tax return data from a stratified sample of 299 middleand upper income taxpayers using the newlydeveloped two stage conditional maximum likelihood analysis to control for endogeneity we extend this approach to the analysis of multi categorical ordered dependent variables findings both dimensions of trust significantly increase the likelihood of tax compliance even after controlling for duty fear selection bias and potential endogeneity effects

higher taxes more evasion evidence from border differentials in tv license fees this paper studies the evasion of tv license fees in austria we exploit border differentials to identify the effect of fees on evasion comparing municipalities at the low and high fee side of state borders reveals that higher fees trigger significantly more evasion our preferred estimator indicates that a one percent increase in fees raises the evasion rate by 0 3 percentage points the positive effect of fees on evasion is confirmed in different parametric and non parametric approaches and survives several robustness checks