going public and the enrichment of a supportive network some evidence from italian initial public offerings past research on initial public offerings suggests that the reputation of a company positively affects the success of the offering success is usually measured in financial terms as if the essence of the operation lay only in the short term inflow of money in this paper we investigate important albeit often neglected implications of going public by combining evidence from a series of preliminary case studies taken from the results of a survey of 57 italian initial public offerings evidence from our research suggests that besides providing an important inflow of capital going public may actually improve the reputational and social capital of a company by increasing its visibility prestige and perceived trustworthiness therefore going public may be an important way to support entrepreneurial activity as it may expand and reinforce the network of relationships that offer access to external resources complementary skills and investment opportunities

bounds on elasticities with optimization frictions a synthesis of micro and macro evidence on labor supply how can price elasticities be identified when agents face optimization frictions such as adjustment costs or inattention i derive bounds on structural price elasticities that are a function of the observed effect of a price change on demand the size of the price change and the degree of frictions the degree of frictions is measured by the utility losses agents tolerate to deviate from the frictionless optimum the bounds imply that frictions affect intensive margin elasticities much more than extensive margin elasticities i apply these bounds to the literature on labor supply the utility costs of ignoring the tax changes used to identify intensive margin labor supply elasticities are typically less than 1 of earnings as a result small frictions can explain the differences between micro and macro elasticities extensive and intensive margin elasticities and other disparate findings pooling estimates from existing studies i estimate a hicksian labor supply elasticity of 0 33 on the intensive margin and 0 25 on the extensive margin after accounting for frictions

labor income responds differently to income tax and payroll tax reforms we estimate the responses of gross labor income with respect to marginal and average net of tax rates in france over the period 2003 2006 we exploit a series of reforms to the income tax and payroll tax schedules affecting individuals who earn less than twice the minimum wage our estimate for the elasticity of gross labor income with respect to the marginal net of income tax rate is around 0 2 while we find no response to the marginal net of payroll tax rate the elasticity with respect to the average net of tax rate is not significant for the income tax schedule while it is close to 1 for the payroll tax schedule a plausible explanation is the existence of significant labor supply responses to the income tax schedule combined with sticky posted wages i e the gross labor income minus payroll taxes divided by hours worked finally the effect of the net of income tax rate seems to be driven by participation decisions in particular those of married women

the impact of marginal tax rates on taxable income evidence from state income tax differentials the relationship between marginal tax rates and taxable income is analyzed with a large cross section of income tax returns filed by individuals who face different marginal tax rates because of state income tax differentials the empirical results suggest that an increase in the marginal tax rate reduces taxable income primarily because taxpayers claim larger deductions high income taxpayers are found to be more responsive to tax rate changes than lower income individuals the findings are compared to those of other recent studies incorporating a wider range of taxpayer responses to tax rate changes than considered in this study

trends in the transitory variance of earnings in the united states we decompose the rise in cross sectional variance of male annual earnings in the united states from 1969 to 1996 into permanent and transitory components we find that the variance of permanent earnings began rising in the the late 1970s and has continued to rise in the 1980s the variance of transitory earnings also rose in the 1980s but declined in the 1990s there are lags in the earnings process which require a structural model to pinpoint the exact calendar times at which the changes in trends occurred

labor supply and optimization frictions evidence from the danish student labor market abstract using danish administrative data i investigate the magnitude and nature of optimization frictions in the labor market of danish students danish students face a unique institutional setting that makes it possible to distinguish between different types of frictions and estimate their effect on individual utility i find that frictions significantly affect observed labor market outcomes in particular the empirical evidence points to inattention as the dominant type of friction in contrast my findings appear inconsistent with real adjustment costs price misperception and gradual learning overall optimization frictions reduce the utility of individuals by approximately 2 3 of disposable income

identifying the elasticity of taxable income we use matched panels from the current population survey along with a grouping instrumental variables estimator to provide new estimates of the elasticity of taxable income our identification strategy exploits the fact that federal and state tax reforms over the past three decades have differentially affected cohorts across states and over time we find that the elasticity is in the range of 0 4 0 55 the implication of our new estimates for tax policy is that the revenue maximising tax rate is nearly 30 percentage points lower than that obtained when we use the typical identification strategy in the literature

toward obtaining a consistent estimate of the elasticity of taxable income using difference in differences abstract the elasticity of taxable income eti is a central parameter for tax policy debates this paper shows that mean reversion prevents most estimators employed in the literature from obtaining consistent estimates of the eti a new method is proposed that will resolve inconsistency due to mean reversion under testable assumptions regarding the degree of serial correlation in the error term using this procedure i estimate an eti of 0 858 which is about twice as large as the estimates found in the most frequently cited paper on this subject 13 the corresponding elasticity of broad income is 0 475

elasticity of taxable income evidence from changes in municipal income tax rates in finland the elasticity of taxable income eti is a key parameter in income tax analysis both in terms of efficiency and tax revenue this paper uses finnish data to analyze the eti i use changes in flat municipal income tax rates as an instrument for overall changes in marginal tax rates this instrument is not a function of individual income and thus the eti estimates are less susceptible to bias caused by differential trends across the income distribution in general instruments used in previous studies do not have this feature my preferred estimate for the average eti is 0 21 this article is protected by copyright all rights reserved

the elasticity of taxable income with respect to marginal tax rates a critical review this paper critically surveys the large and growing literature estimating the elasticity of taxable income with respect to marginal tax rates using tax return data first we provide a theoretical framework showing under what assumptions this elasticity can be used as a sufficient statistic for efficiency and optimal tax analysis we discuss what other parameters should be estimated when the elasticity is not a sufficient statistic second we discuss conceptually the key issues that arise in the empirical estimation of the elasticity of taxable income using the example of the 1993 top individual income tax rate increase in the united states to illustrate those issues third we provide a critical discussion of selected empirical analyses of the elasticity of taxable income in light of the theoretical and empirical framework we laid out finally we discuss avenues for future research jel h24 h31 j22

taxation and the earnings of husbands and wives evidence from sweden i examine the response of husbands and wives earnings to a tax reform in which husbands and wives tax rates changed independently allowing me to examine the effect of both spouses incentives on each spouse s behavior i analyze the large swedish tax reform of 1990 1991 and find that in response to a compensated fall in one spouse s tax rate each spouse s earnings rise i compare these results to those of simplified econometric models used in the typical setting in which independent variation in each spouse s tax rate is unavailable i find that standard econometric specifications may produce substantially biased estimates

the effect of income taxes on household income research on the distribution of income during the 1980s has identified a trend towards increasing inequality which may be the continuation and acceleration of trends spanning several decades this paper explores to what extent behavioral responses to the tax changes during the 1980s may also explain the rising inequality the 1986 tax reform act is used as a natural experiment to explore the roles played by both taxes and a variety of nontax factors our principal finding is that both tax rates and nontax factors appear to have had significant effects on relative income growth during the late 1980s

the effect of marginal tax rates on income a panel study of bracket creep this paper uses a panel of individual tax returns and the bracket creep as source of tax rate variation to construct instrumental variables estimates of the sensitivity of income to changes in tax rates from 1979 to 1981 the us income tax schedule was fixed in nominal terms while inflation was high around 10 this produced a real change in tax rate schedules taxpayers near the top end of a tax bracket were more likely to creep to a higher bracket and thus experience a rise in marginal rates the following year than the other taxpayers compensated elasticities can be estimated by comparing the differences in changes in income between taxpayers close to the top end of a tax bracket to the other taxpayers these estimates based on comparisons between very similar groups are robust to underlying changes in the income distribution such as a rise in inequality the elasticities of taxable income and adjusted gross income are around 0 4 and significant but the elasticities of wage income are in general insignificant and close to zero 2002 elsevier science b v all rights reserved

more giving or more givers the effects of tax incentives on charitable donations in the uk abstract this paper estimates the effects of tax incentives on charitable contributions in the uk using the universe of self assessment income tax returns between 2005 and 2013 we exploit variation from a large reform in 2010 to estimate intensive and extensive margin tax price elasticities of giving using a predicted tax rate instrument for the price of giving relative to consumption we find an intensive margin elasticity of about 0 2 and an extensive margin elasticity of 0 1 yielding a total elasticity of about 0 3 to further explore the extensive margin response we propose a model with a fixed cost of declaring donations and obtain a structural estimate of that cost of around 47 we also study the welfare effects of tax incentives extending the theoretical literature to allow for extensive margin giving and for a fixed cost of declaring donations taking into account these factors there is a case for increasing the subsidy on charitable giving in the uk

do tax credits stimulate r d spending the effect of the r d tax credit in its first decade abstract this paper examines the impact of the u s federal r d tax credit between 1981 1991 using confidential irs data from corporate tax returns the empirical analysis makes two key advances on previous work first it implements a new instrumental variables iv strategy based on tax changes that directly addresses the simultaneity of r d spending and marginal credit rates second the analysis makes use of new restricted access irs corporate return data describing r d expenditures estimates imply that a10 reduction in the user cost of r d leads the average firm to increase its research intensity the ratio of r d spending to sales by 19 8 in the short run long run estimates imply that the average firm faces adjustment costs and increases spending over time though small and young firms show evidence of reversing initial increases analysis of the components of qualified research shows that wages and supplies account for the bulk of the increase in research spending elasticities of qualified and total research intensities from a smaller sample suggest firms respond to user cost changes largely by increasing their qualified spending meaning that the type of r d the federal credit deems qualified research is an important margin on which the credit affects firm behavior

hourly wage rate and taxable labor income responsiveness to changes in marginal tax rates recently a voluminous literature estimating the taxable income elasticity has emerged as an important field in empirical public economics however to a large extent it is still unknown how the hourly wage rate an important component of taxable income reacts to changes in marginal tax rates in this study we use a rich panel data set and a sequence of tax reforms that took place in sweden during the 1980 s to estimate the elasticity of the hourly wage rate with respect to the net of tax rate while carefully accounting for the endogeneity of marginal tax rates as well as other factors that determine wage rates we do find a statistically significant response both among married men and married women the hourly wage rate elasticity with respect to the net of tax rate is estimated to 0 14 0 16 for males and 0 41 0 57 for females in addition we obtain uncompensated taxable labor income elasticities of around 0 21 for men and 0 96 1 44 for women in contrast to earlier studies we also find significant income effects for males accordingly for males the compensated taxable labor income elasticity is about 4 percentage points higher than the uncompensated one

the elasticity of taxable income during the 1990s new estimates and sensitivity analyses author affiliation seth h giertz sgiertz2 unl edu acknowledgment the author wishes to thank david weiner ed harris bob dennis doug hamilton tom woodward emmanuel saez chris bollinger and three anonymous referees for their comments and assistance 1 introductioneconomists have long recognized that taxation creates economic inefficiency by distorting relative prices often between leisure and all other goods in the economy even a broad based income tax can have substantial efficiency costs so long as leisure remains untaxed harberger 1964 uses this as motivation for comparing the efficiency implications of direct versus indirect taxation in so doing he shows how labor supply elasticities can be used to measure the efficiency implications of income taxation 1 harberger s analysis had a profound influence on public and labor economists spurring increased research into labor supply elasticities which were seen as proxies for the efficiency costs from taxation more than two decades after harberger economists began to emphasize the variety of other margins over which taxes can distort behavior in addition to hours worked these economists noted that these other behavioral responses may too have important implications for efficiency an important building block in the evolution of this literature was set forth by slemrod 1990 who presented a hierarchy of behavioral responses to taxation slemrod divided behavior into three categories based on their responsiveness to taxes his least responsive category real responses includes individuals changing consumption and work patterns and businesses altering investment and production decisions second in order of responsiveness is circumvention which includes both illegally evasion and legally avoidance bypassing the tax system 2 in the case of evasion income is concealed from tax authorities or factors that offset tax liabilities such as expenses and deductions are inflated beyond what is legally permitted in the case of avoidance income is shifted in order to receive more favorable tax treatment diverting income into a tax deferred retirement account is an example of avoidance 3 included in circumvention is the expenditure of time and money necessary to avoid or evade taxation third on the hierarchy and the most responsive is the timing of income receipt which includes pulling the receipt of income into the previous year or pushing it into the next in order to take advantage of more favorable tax treatment while not altering real behavior 4 slemrod further recognizes that the type of behavioral response could have implications for both tax revenue and tax incidence and in some cases efficiency predating slemrod s insights lindsey 1987 produced elasticity estimates for taxable income although what lindsey termed taxable income more closely approximates adjusted gross income agi instead of labor supply 5 lindsey s estimated elasticities were much larger than the labor supply literature would have suggested lindsey emphasized the revenue implications of the elasticity of taxable income eti but not its efficiency implications building on slemrod and lindsey feldstein 1995 produced eti estimates but went much further than lindsey in describing the behaviors that could affect taxable income he argued that many of these behaviors were not captured by labor supply elasticities furthermore feldstein posited that income taxation creates economic inefficiency not only by distorting the relative price between labor and leisure but more broadly by distorting the relative price between goods or activities that are taxed and those that are not taxed since leisure is not the only untaxed activity for example in response to taxes not only work hours but also work effort might change

tax avoidance and the deadweight loss of the income tax traditional analyses of the income tax greatly underestimate deadweight losses by ignoring its effect on forms of compensation and patterns of consumption the full deadweight loss is easily calculated using the compensated elasticity of taxable income to changes in tax rates because leisure excludable income and deductible consumption are a hicksian composite good microeconomic estimates imply a deadweight loss of as much as 30 of revenue or more than ten times harberger s classic 1964 estimate the relative deadweight loss caused by increasing existing tax rates is substantially greater and may exceed 2 per 1 of revenue

corporate tax incentives and capital structure new evidence from uk firm level tax returns abstract we investigate how companies capital structure is affected by corporate income taxes using confidential company level tax returns for a large sample of uk firms exploiting variation in companies marginal tax rates we find a positive and substantial long run tax effect on leverage leverage responds more to decreases in the marginal tax rate and it responds to changes in the marginal rather than the average tax rate most importantly we find that the marginal tax rate based on tax returns has greater explanatory power for companies leverage than the marginal tax rate based on financial statements our study suggests that errors in the measurement for tax incentives using financial statements could lead to underestimation of the tax effects on capital structure

estimating taxable income responses with elasticity heterogeneity abstract we explore elasticity heterogeneity in the estimation of the elasticity of taxable income eti and propose potentially valid instruments we show that previously used instruments are not valid and yield weighted averages of etis of different taxpayers plus a bias using the nber tax panel for 1979 1990 we find a weighted average eti of 0 57 when using all available variation in budget set changes provided by the tax reforms in the data our results also demonstrate that elasticity heterogeneity is an important explanation for the remarkable divergence of estimates in the previous literature

tax bases tax rates and the elasticity of reported income abstract tax reforms usually change both tax rates and tax bases using a panel of income tax returns spanning the two major u s tax reforms of the 1980s and a number of smaller tax law changes i find that the elasticity of income reported on personal income tax returns depends on the available deductions this highlights that this key behavioral elasticity is not an immutable parameter but rather that it can be to some extent controlled by policy makers one implication is that base broadening reduces the marginal efficiency cost of taxation the results are very similar for all income categories indicating that the rich are more responsive to tax rates because tax rules that apply to them are different their tax base is narrower the point estimates indicate that the tax reform act of 1986 reduced the marginal cost of collecting a dollar of tax revenue with roughly half of this reduction due to the base broadening and the other half due to the tax rate reduction as a by product the analysis in this paper offers a reconciliation of disparate estimates obtained by previous studies of the tax responsiveness of income

the impact of microfinance in sub saharan africa a systematic review of the evidence microfinance is seen as a key development tool and despite the current deepening crisis within the industry it continues to grow in sub saharan africa we systematically reviewed the evidence of the impacts of micro credit and micro savings on poor people in sub saharan africa we considered impacts on income savings expenditure and the accumulation of assets as well as non financial outcomes including health nutrition food security education child labor women s empowerment housing job creation and social cohesion the available evidence shows that microfinance does harm as well as good to the livelihoods of the poor

the elasticity of taxable income evidence and implications abstract a central tax policy parameter that has recently received much attention but about which there is substantial uncertainty is the overall elasticity of taxable income we provide new estimates of this elasticity which address identification problems with previous work by exploiting a long panel of tax returns to study a series of tax reforms throughout the 1980s this identification strategy also allows us to provide new evidence on both the income effects of tax changes on taxable income and on variation in the elasticity of taxable income by income group we find that the overall elasticity of taxable income is approximately 0 4 the elasticity of real income not including tax preferences is much lower we estimate small income effects of tax changes on reported income implying that the compensated and uncompensated elasticities of taxable income are very similar we estimate that this overall elasticity is primarily due to a very elastic response of taxable income for taxpayers who have incomes above 100 000 per year who have an elasticity of 0 57 while for those with incomes below 100 000 per year the elasticity is less than one third as large moreover high income taxpayers who itemize are particularly responsive to taxation our estimates suggest that optimal tax structures may feature tightly targeted transfers to lower income taxpayers and a flat or even declining marginal rate structure for middle and high income taxpayers