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

explaining the international intensity and global diversity of early stage technology based firms abstract early stage technology based firms are confronted with the complexity of foreign markets and global competition from their earliest stages of development not only must technology entrepreneurs keep pace with ever changing technology based product offerings but they must also simultaneously stay abreast of competitors and industry trends in multiple countries we surveyed 75 small technology based firms in ontario to evaluate their international activities and try to explain both the intensity of their foreign sales the percent of total sales coming from foreign sources as well as the global diversity of the markets in which they operate the number of major regional areas from which they derive revenue our findings suggest that resources necessary to pursue international sales have an important impact on both foreign market intensity and diversity in contrast however attitudes towards foreign markets helped to explain international intensity but not global diversity additionally firm age was positively associated with global diversity but not international intensity these findings support the notion of small technology firms being instant internationals but suggest that proceeding to the next step achieving global diversity requires significantly greater time and resources in line with prior empirical research these firms tended to increase their international intensity and diversity as they became larger in contrast with what the literature suggests however firms utilizing strategic alliances were no more active internationally than those not using strategic alliances finally government assistance helped to explain the international intensity of these firms but not the global diversity these results help managers researchers and shapers of public policy better understand the international activities of early stage technology firms given the relationship between attitudes and international intensity there appears to be some opportunity associated with trying to influence the attitudes of ceos regarding initial expansion into international markets for firms to become globally diverse however there is a greater dependency on the availability of resources as well as accumulated business experience managers should recognize the pattern this suggests and perhaps be leery of becoming too globally diverse too quickly overall the relationship between size and foreign activities suggests that growth opportunities are linked to international markets although some broad relationships are suggested regarding the need for collaboration and government support further research is necessary to understand the use of strategic alliances as well as government assistance in both international market intensity and global diversity

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

effect sizes and the interpretation of research results in international business journal editors and academy presidents are increasingly calling on researchers to evaluate the substantive as opposed to the statistical significance of their results to measure the extent to which these calls have been heeded i aggregated the meta analytically derived effect size estimates obtained from 965 individual samples i then surveyed 204 studies published in the journal of international business studies i found that the average effect size in international business research is small and that most published studies lack the statistical power to detect such effects reliably i also found that many authors confuse statistical with substantive significance when interpreting their research results these practices have likely led to unacceptably high type ii error rates and invalid inferences regarding real world effects by emphasizing p values over their effect size estimates researchers are under selling their results and settling for contributions that are less than what they really have to offer in view of this i offer four recommendations for improving research and reporting practices

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

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

the political economics of redistribution inequality and tax avoidance a central result in the political economy of taxation is that the degree of redistribution is positively linked to income inequality however empirical evidence supporting such a relationship turns out to be mixed this paper shows how the different empirical reactions can be rationalized within a simple model of tax avoidance and costly tax enforcement by focusing on structure induced equilibrium in which taxpayers vote over the size of the income tax and the level of tax enforcement we show that more inequality may well reduce the extent of redistribution depending on two opposing effects the standard political effect and a negative tax base effect working through increases in the average level of tax avoidance and the share of enforcement expenditures in total tax revenue

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

signal jamming models of fraudulent misreporting and economic prospects an experimental investigation abstract this study uses experimental methodology to examine how the frequency and magnitude with which managers commit fraud varies with economic prospects boom middle and bust the experimental design is based on signal jamming equilibrium sje models of fraud in which managers make potentially inaccurate public reports and investors bid on shares under sje managers always exaggerate reports by a fixed amount up to the maximum possible report independent of the truth shareholders can perfectly correct managers reports except for the maximum possible report in contrast the results of the experiment show four robust deviations from sje predictions 1 managers exaggerate and shareholders correct reports according to dominated mixed strategies with probabilities significantly less than one 2 managers exaggerate more frequently and by more when outcomes are poor 3 shareholders adjust low reports by less than high reports and 4 shareholders correct relatively high reports by more in booms than busts even though managers reporting strategies are invariant to economic prospects

the intergenerational causal effect of tax evasion evidence from the commuter tax allowance in austria does tax evasion run in the family to answer this question we study the case of the commuter tax allowance in austria this allowance is designed as a step function of the distance between the residence and the workplace creating sharp discontinuities at each bracket threshold the distance to these brackets is a strong determinant of compliance since it corresponds to the probability of detection the match of different administrative data sources allows us to observe actual compliance behavior at the individual level across two generations to identify the intergenerational causal effect in tax evasion behavior we use the paternal distance to bracket as an instrumental variable for paternal compliance we find that paternal noncompliance increases children s non compliance by about 20 percent

tax evasion and inequality this paper attempts to estimate the size and distribution of tax evasion in rich countries we combine random audits the key source used to study tax evasion so far with new micro data leaked from large offshore financial institutions hsbc switzerland swiss leaks and mossack fonseca panama papers matched to population wide wealth records in norway sweden and denmark we find that tax evasion rises sharply with wealth a phenomenon random audits fail to capture on average about 3 of personal taxes are evaded in scandinavia but this figure rises to close to 30 in the top 0 01 of the wealth distribution a group that includes households with more than 45 million in net wealth a simple model of the supply of tax evasion services can explain why evasion rises steeply with wealth taking tax evasion into account increases the rise in inequality seen in tax data since the 1970s markedly highlighting the need to move beyond tax data to capture income and wealth at the top even in countries where tax compliance is generally high we also find that after reducing tax evasion by using tax amnesties tax evaders do not legally avoid taxes more this result suggests that fighting tax evasion can be an effective way to collect more tax revenue from the very wealthy

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

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

do norms on contribution behavior affect intrinsic motivation field experimental evidence from germany abstract this paper studies how imposing norms on contribution behavior affects individuals intrinsic motivation we consider the church levy which the catholic church in germany collects as a charitable donation despite the fact that the levy is legally a tax we design a randomized field experiment with treatments informing individuals that the levy is a tax we demonstrate that treatment effects differ across motivational types among weakly intrinsically motivated individuals communicating the legal norm results in a significant crowd out of intrinsic motivation in contrast strongly intrinsically motivated individuals do not show any treatment response

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

who pays for the minimum wage this paper analyzes the eects of a large 60 and persistent increase in the minimum wage instituted in hungary in 2001 we propose a new approach to estimating the employment eects of a minimum wage increase that exploits information on the distribution of wages before and after the policy change we infer the number of jobs destroyed by comparing the number of pre reform jobs below the new minimum wage to the excess number of jobs paying at and above the new minimum wage our estimates imply that the higher minimum wage had at most a small negative eect on employment and so the main eect was pushing up wages we then use data on a large panel of firms to evaluate the economic incidence of the minimum wage increase contrary to theoretical models that attribute the small employment eects of minimum wage changes to monopsonistic wage setting we find no evidence that the rise in the minimum wage led to lower profitability among low wage employers instead we find that the costs of the minimum wage were largely passed through to consumers

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

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

a note on ranking the international business journals 2000 examined the relative quality of 30 international business ib journals the article s objectives were to present an objective analysis of journal quality for tenure and promotion decisions to guide researchers considering submission options and to provide the academic community with an enhanced understanding of ib publication outlets using citation analyses and a survey questionnaire journal rankings were developed as designed the study was carefully executed and provides a comprehensive list of journals that publish ib research within the ib research acad

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

moral hazard in health insurance do dynamic incentives matter using data from employer provided health insurance and medicare part d we investigate whether healthcare utilization responds to the dynamic incentives created by the nonlinear nature of health insurance contracts we exploit the fact that because annual coverage usually resets every january individuals who join a plan later in the year face the same initial spot price of healthcare but a higher expected end of year future price we find a statistically significant response of initial utilization to the future price rejecting the null that individuals respond only to the spot price we discuss implications for analysis of moral hazard in health insurance

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

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

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

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

using differences in knowledge across neighborhoods to uncover the impacts of the eitc on earnings we develop a new method of estimating the impacts of tax policies that uses areas with little knowledge about the policy s marginal incentives as counterfactuals for behavior in the absence of the policy we apply this method to characterize the impacts of the earned income tax credit eitc on earnings using administrative tax records covering all eitc eligible lers from 19962009 we begin by developing a proxy for local knowledge about the eitc schedule the degree of sharp bunching at the exact income level that maximizes eitc refunds by individuals who report self employment income the degree of self employed sharp bunching varies signi cantly

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

the rand health insurance experiment three decades later we re present and re examine the analysis from the famous rand health insurance experiment from the 1970s on the impact of consumer cost sharing in health insurance on medical spending we begin by summarizing the experiment and its core findings in a manner that would be standard in the current age we then examine potential threats to the validity of a causal interpretation of the experimental treatment effects stemming from different study participation and differential reporting of outcomes across treatment arms finally we re consider the famous rand estimate that the elasticity of medical spending with respect to its out of pocket price is 0 2 emphasizing the challenges associated with summarizing the experimental treatment effects from non linear health insurance contracts using a single price elasticity

the response of drug expenditure to nonlinear contract design evidence from medicare part d we study the demand response to non linear price schedules using data on insurance contracts and prescription drug purchases in medicare part d we exploit the kink in individuals budget set created by the famous donut hole where insurance becomes discontinuously much less generous on the margin to provide descriptive evidence of the drug purchase response to a price increase we then specify and estimate a simple dynamic model of drug use that allows us to quantify the spending response along the entire non linear budget set we use the model for counterfactual analysis of the increase in spending from filling the donut hole as will be required by 2020 under the affordable care act in our baseline model which considers spending decisions within a single year we estimate that filling the donut hole will increase annual drug spending by about 150 or about 8 percent about one quarter of this spending increase reflects anticipatory behavior coming from beneficiaries whose spending prior to the policy change would leave them short of reaching the donut hole we also present descriptive evidence of cross year substitution of spending by individuals who reach the kink which motivates a simple extension to our baseline model that allows in a highly stylized way for individuals to engage in such cross year substitution our estimates from this extension suggest that a large share of the 150 drug spending increase could be attributed to cross year substitution and the net increase could be as little as 45 per year

optimal management of transfers an odd paradox abstract this paper considers the case of transfers when there exists a serious preference misalignment between the transfer maker and the beneficiary the former wants to reduce the resulting outcome discrepancy through monitoring the use of the transfer and imposing sanctions if the discrepancy proves too large this external discipline combines with the internal discipline of the beneficiary that is his her willingness and ability to align with the transfer maker s objective besides the fact that costs of monitoring and sanctioning are explicitly taken into account an original feature of our model specification is that the two types of discipline are made comparable they can be summed up to obtain an aggregate discipline we show that paradoxically an exogenous improvement of internal discipline may be over compensated by a fall of external discipline total discipline thus decreases and the discrepancy between the actual and the intended uses of the transfer increases instead of decreasing another consequence is that the relationship between internal and total disciplines may be non monotonic these results generalize to alternative specifications of the basic model

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

behavioral effects of withholding taxes on labor supply in most advanced economies income tax collection uses third party withholding for wage income because withholding taxes do not necessarily reflect true effective taxes these may give false signals of net of tax pay we test labor supply responses to such misconceptions using laboratory experiments withholding taxes and the resulting tax refunds should be behaviorally neutral but our results show that tax adjustments lead to effort adjustments which suggests that withholding blurs tax incentives while there is no statistically significant response in the overall sample the participants in the subgroup who self assess to be motivated by monetary incentives about half of the total sample reduce their effort in response to withholding taxes and increase their effort after receiving tax refunds

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

selection on moral hazard in health insurance economic analysis of market failure in insurance markets tends to analyze selection and moral hazard as distinct phenomena in this paper we explore the potential for selection on moral hazard in insurance markets by this we mean the possibility that moral hazard effects are heterogenous across individuals and that individuals selection of insurance coverage is affected by their anticipated behavioral response to coverage we examine these issues empirically in the context of employer provided health insurance in the united states specifically we break down the general

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

public provision of private goods self selection and income tax avoidance several contributions in the optimal taxation literature have emphasized that when individuals preferences are not separable between leisure and other goods it is desirable to supplement a nonlinear income tax with public provision of private goods moreover it has also been shown that the choice between a topping up and an opting out scheme depends on whether the publicly provided good is a complement or substitute with leisure with opting out topping up being the preferred scheme for goods which are substitutes complements for labor in this paper using the self selection approach to tax analysis we revisit these results in the presence of tax avoidance and investigate how public provision interacts withthe agents incentives to engage in tax avoidance three results are obtained first we show that tax dodging opportunities imply that non separability between labor and other goods is neither a necessary nor a sufficient condition to make public provision of private goods a welfare enhancing policy instrument second we show how tax dodging opportunities limit the scope for using topping up provision schemes as a redistributive device finally we show that for most of the public provision schemes previously analyzed in the literature being a welfare enhancing policy instrument goes hand in hand with weakening the agents incentives to shelter income from the tax authority however we also point out an important exceptionto this pattern

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

using notches to uncover optimization frictions and structural elasticities theory and evidence from pakistan we develop a framework for nonparametrically identifying optimization frictions and structural elasticities using notches discontinuities in the choice sets of agents introduced by tax and transfer policies notches create excess bunching on the low tax side and missing mass on the high tax side of a cutoff and they are often associated with a region of strictly dominated choice that would have zero mass in a frictionless world by combining excess bunching observed response attenuated by frictions with missing mass in the dominated region frictions it is possible to uncover the structural elasticity that would govern behavior in the absence of frictions and arguably capture long run behavior we apply our framework to tax notches in pakistan using rich administrative data while observed bunching is large and sharp optimization frictions are also very large as the majority of taxpayers in dominated ranges are unresponsive to tax incentives the combination of large observed bunching and large frictions implies that the frictionless behavioral response to notches is extremely large but the underlying structural elasticity driving this response is nevertheless modest this highlights the inefficiency of notches by creating extremely strong price distortions they induce large behavioral responses even when structural elasticities are small

cellular service demand biased beliefs learning and bill shock by april 2013 the fcc s recent bill shock agreement with cellular carriers requires consumers be notied when exceeding usage allowances will the agreement help or hurt consumers to answer this question we estimate a model of consumer plan choice usage and learning using a panel of cellular bills our model predicts that the agreement will lower average consumer welfare by 2 per year because rms will respond by raising monthly fees our approach is based on novel evidence that consumers are inattentive to past usage meaning that bill shock alerts are informative and advances structural modeling of demand in situations where multipart taris induce marginal price uncertainty additionally our model estimates show that an

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

tax farming redux experimental evidence on performance pay for tax collectors performance pay for tax collectors has the potential to raise revenues but might come at a cost if it increases the bargaining power of tax collectors vis a vis taxpayers we report the first large scale field experiment on these issues where we experimentally allocated 482 property tax units in punjab pakistan into one of three performance pay schemes or a control after two years incentivized units had 9 4 log points higher revenue than controls which translates to a 46 higher growth rate the scheme that rewarded purely on revenue did best increasing revenue by 12 9 log points 64 higher growth rate with little penalty for customer satisfaction and assessment accuracy compared to the two other schemes that explicitly also rewarded these dimensions the revenue gains accrue from a small number of properties becoming taxed at their true value which is substantially more than they had been taxed at previously the majority of properties in incentivized areas in fact pay no more taxes but instead report higher bribes the results are consistent with a collusive setting in which performance pay increases collectors bargaining power over taxpayers who have to either pay higher bribes to avoid being reassessed or pay substantially higher taxes if collusion breaks down

consumer inattention and bill shock regulation for many goods and services such as electricity health care cellular phone service debit card transactions or those sold with loyalty discounts the price of the next unit of service depends on past usage as a result consumers who are inattentive to their past usage but are aware of contract terms may remain uncertain about the price of the next unit i develop a model of inattentive consumption derive equilibrium pricing when consumers are inattentive and evaluate bill shock regulation requiring firms to disclose information that substitutes for attention when inattentive consumers are sophisticated but heterogeneous in their expected demand bill shock regulation reduces social welfare in fairly competitive markets which may be the effect of the federal communication commission s recent bill shock agreement if some consumers are attentive while others naively fail to anticipate their own inattention however then bill shock regulation increases social welfare and can benefit consumers hence requiring zero balance alerts in addition to the federal reserve s new opt in rule for debit card overdraft protection may benefit consumers

experimental evidence on the relationship between tax evasion opportunities and labor supply abstract motivated by the observation that access to evasion opportunities is distributed heterogeneously across the labor market this paper examines the extent to which labor supply elasticities with respect to tax rates depend on such evasion opportunities we first discuss the channels through which access to evasion affects labor supply responses and then set up a laboratory experiment n 205 in which all participants undertake a real effort task over several rounds subjects face a tax rate that varies across rounds and are required to pay taxes on earned income the treatment group is given the opportunity to underreport income while the control group is not we find evidence that participants in the treatment group respond differently to changes in the net of tax rate than participants in the control group the effect is more prevalent when tax rates fall additionally the direction of the treatment effect is dependent on the evolution of tax rates across rounds

explaining the national cultural distance paradox past studies of the relationship between national cultural distance and entry mode choice have produced conflicting results some scholars find cultural distance associated with choosing wholly owned modes others find cultural distance linked to a preference for joint ventures in this paper we provide both theoretical and empirical evidence to explain the discrepant findings and thus help to resolve the national cultural distance paradox

tax evasion capital gains taxes and the housing market abstract in this study we exploit a policy shock that differentially increased capital gains taxes for housing units with holding period less than 5 years and document tax avoidance and tax evasion in the residential resale market in china we show suggestive evidence that after the capital gains tax increase resale transactions exhibit more bunching above 5 years of holding period but the responses are small and imprecisely estimated more importantly using precise information of both the actual transaction price and the reported price to the tax authority we find that tax evasion measured by the difference between the two prices becomes 23 3 higher we also document that the policy has strong heterogeneous effects whereby cash buyers are 8 4 more likely to buy a house than buyers who need financing after the policy this is mainly because financing buyers prefer a higher reported price and so less tax evasion to secure higher bank loans but cash buyers do not have such concern

the effect of a fiscal squeeze on tax enforcement evidence from a natural experiment in china abstract this paper investigates the impact of the abolition of the agricultural taxes in 2005 across china on county governments incentives for tax enforcement i show that the revenue loss of county governments was largely offset by tougher tax enforcement the incentive for vat enforcement can be weakened however if the county 1 receives a lower share of total vat revenues 2 has a broader vat tax base or 3 has more abundant sources of revenue from land sales these findings suggest that incentives of local governments can be vital to tax enforcement and to the tax capacity of a country

ranking the international business journals this study seeks to assess and rank the relative quality of 30 international business journals using both a citation analysis and a survey approach journal rankings are presented using both approaches in addition to a composite ranking the rankings provide an objective analysis of journal quality for tenure and promotion committees for ib researchers considering journal submission options and provide the academic community with a better understanding of which international business publication outlets are the most influential in guiding research in this discipline

adjustment costs firm responses and micro vs macro labor supply elasticities evidence from danish tax records we show that the effects of taxes on labor supply are shaped by interactions between adjustment costs for workers and hours constraints set by firms we develop a model in which firms post job offers characterized by an hours requirement and workers pay search costs to find jobs we present evidence supporting three predictions of this model by analyzing bunching at kinks using danish tax records first larger kinks generate larger taxable income elasticities second kinks that apply to a larger group of workers generate larger elasticities third the distribution of job offers is tailored to match workers aggregate tax preferences in equilibrium our results suggest that macro elasticities may be substantially larger than the estimates obtained using standard microeconometric methods

bunching and non bunching at kink points of the swedish tax schedule recent microeconometric studies of taxpayers responsiveness to taxation have shown that intensive margin labor supply and earnings elasticities typically are modest and sometimes equal to zero however a common view is that long run responses might still be large since micro estimates are downward biased owing to optimization frictions in this paper we estimate the taxable income elasticity at a very large kink point of the swedish tax schedule using the bunching method during the period of study the change in the log net of tax rate reached a maximum value of 45 6 interestingly we obtain a precise elasticity estimate of zero for wage earners at this large kink the size of the kink allows us to derive tighter bounds on the long run elasticity than previous studies if wage earners on average tolerate 1 of their disposable income in optimization costs the upper bound on the long run taxable income elasticity is 0 39 we also evaluate the performance of the bunching estimator by performing monte carlo simulations

what makes and what does not make a real option a study of equity shares in international joint ventures this paper examines the boundaries of real options logic with an application to joint ventures jvs we distinguish between forms of uncertainty that are resolved endogenously and those that are resolved exogenously and theorize that only exogenous uncertainty will have the impact predicted by real options theory on a foreign investor s choice of how large an equity share to take in a jv we theorize that macroeconomic and institutional variables generate exogenous uncertainty whereas by contrast cultural distance and choices pertaining to corporate scope and product or process development activities involve endogenous sources of uncertainty that investors can both assess and act upon without having to wait and see using a sample of 6472 sino foreign jvs we find support for our predictions we discuss and implement proper methods to test for the existence of null effects as is relevant to establish the boundaries of a theory such as real options theory we draw implications for research and practice on jvs specifically equity share decisions which deserve more attention and real options including suitable uses and desirable extensions of the concept

deterrence vs gamesmanship taxpayer response to targeted audits and endogenous penalties abstract taxpayers with large amounts of non third party reported income usually self report at least a portion of it an act inconsistent with common theories of compliance i explain this behavior by generalizing the classical evasion theory to realistically account for the endogeneity of audit and payment rates these taxpayers refrain from more evasion not due to deterrence but to tilt the odds and payoffs of the evasion gamble the introduction of this incentive helps explain many empirical findings that seemingly contradict a more restrictive and unrealistic version of the deterrence paradigm i also estimate feasible structural calibrations the first based on observed compliance behavior of taxpayers perceptions of the relationship between evasion audit probabilities and payment rates

does credit card information reporting improve small business tax compliance we investigate the response of small businesses operating as sole proprietorships to form 1099 k an information report introduced in 2011 which provides the internal revenue service with information about electronic sales e g credit card sales the overall impact of the policy appears to be relatively small however theory and distributional analysis isolates a subset of taxpayers expected to be especially sensitive to reporting who report receipts equal to or slightly exceeding the receipts reported on 1099 k among this set of taxpayers information reporting induced more complete tax reporting 30 of sensitive taxpayers filed a return declaring business income for the first time and among those that were already filing we estimate an increase in reported receipts by up to 24 these taxpayers largely offset increased reported receipts with increased reported expenses which do not face information reporting diminishing the impact on reported net taxable income

improving generalizations from multi country comparisons in international business research in this paper we address the problem of questionable generalizations from comparing small numbers of countries in international business ib research we illustrate the misleading results that can arise from sparse samples whether the relationship between national level variables is strong economic development and corruption or weak population density and trust we show that 35 of recent international comparisons in leading ib journals examined just two or three countries and present an exploratory analysis of 123 variables that reveals typical correlations across countries to be rather moderate average r 0 24 to help interpret extant study findings we provide formulas and graphs based on bayesian analysis and introduce a method of combining results from multiple international comparisons we also describe methods for designing studies to give stronger evidence of relationships between variables our results suggest that a minimum of 7 10 countries may support credible international generalizations but only when overall trends are very strong a key strategy for improving ib generalizations is to use larger samples of countries because research based on common sample and effect sizes may lead to generalizations that the findings do not justify

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

car notches strategic automaker responses to fuel economy policy notches where small changes in behavior lead to large changes in a tax or subsidy gure prominently in many policies but have been rarely examined by economists in this paper we analyze a class of notches associated with policies aimed at improving vehicle fuel economy we provide several pieces of evidence showing that automakers respond to notches in fuel economy policy by precisely manipulating fuel economy ratings so as to just qualify for more favorable treatment we then describe the welfare consequences of this behavior and derive a welfare summary statistic applicable to many contexts

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

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

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

reprint of 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

the stature of the journal of international business studies this article examines the standing of the journal of international business studies jibs among scholarly journals and changes in its influence over a 11 year period 1981 to 1991 using a variety of citation indices we suggested that two new measures a prestige index and a trajectory index are helpful in assessing a journal s influence and reputation we estimate these as well as several standard citation measures to gauge jibs progress in the recent past we find that jibs does well on all measures but room for improvement remains this article discusses options available to the editorial board to raise jibs prestige

an analysis of twenty five years of research in the journal of international business studies the article analyzes the twenty five years of research published in the journal of international business studies jibs since its inception in 1970 the article reviews the authors their institutional affiliations and the discipline content of the published articles

the power of international business research statistical power is the probability of accepting the null hypothesis when it is false type ii error this research note reports the results of a statistical power analysis of international business research published in the journal of international business studies management international review the academy of management journal and the strategic management journal from 1990 to 1999 the results show that although average statistical power is high compared with other disciplines it is sufficient only for large effect sizes ess only studies published in the journal of international business studies and the academy of management journal achieve average statistical power levels that are sufficient for both medium and large ess still the observed likelihood of committing type ii errors in international business research is very high for small ess 92 and high for medium ess 45 in addition statistical power is not explicitly mentioned or used by international business researchers a weakness that this note is designed to change

tax bunching income shifting and self employment abstract this paper proposes a dynamic extension to saez 2010 bunching formula that allows us to distinguish bunching based on real responses and income shifting we provide direct evidence of income shifting and pronounced bunching in taxable income for the danish self employed if income shifting was neglected in this case we would estimate a taxable income elasticity in the range of 0 43 0 53 and conclude that taxable incomes were highly sensitive to changes in marginal tax rates we show however that more than half of the bunching in taxable income is driven by intertemporal income shifting implying a structural elasticity of 0 14 0 20

the elasticity of taxable income in the presence of deduction possibilities several recent studies show that the elasticity of taxable income eti is not a sufficient statistic for the welfare costs of taxation due to factors such as tax base shifting this paper provides an additional argument demonstrating the non sufficiency of the eti namely tax deductions building on a theoretical framework which incorporates deductions in a standard optimal tax model we show that the eti is not sufficient for welfare analysis if i deductions generate externalities and if ii deductions are responsive to tax rate changes while the first condition should arguably hold true for the majority of tax deductions we provide an empirical examination of the second condition relying on rich german panel data from administrative tax records we exploit several tax reforms that were implemented in germany between 2001 and 2008 our main estimates indicate an overall eti between 0 54 and 0 68 and an elasticity of deductions with respect to the net of tax rate of about 0 9 these results suggest that the eti is not sufficient to calculate the welfare cost of taxation

a field experiment on intertemporal enforcement spillovers enforcement can affect compliance directly and indirectly through spillovers we study intertemporal enforcement spillovers by conducting a randomized field experiment in a university exam the initial phase of the experiment is the exam itself we induce variation in enforcement by randomly assigning students to rooms with different monitoring levels the second phase is post exam in this phase all students are subject to the same low level of monitoring our outcome variable is the probability that students steal a pen in the post exam phase we find that enforcement in the exam phase has a strong intertemporal spillover on compliance in the post exam phase students subject to a high monitoring level in the initial phase are about 33 less likely to steal the pen than students subject to low initial monitoring

do ethics matter tax compliance and morality in this article we argue that puzzle of tax compliance can be explained at least in part by recognizing the typically neglected role of ethics in individual behavior that is individuals do not always behave as the selfish rational self interested individuals portrayed in the standard neoclassical paradigm but rather are often motivated by many other factors that have as their main foundation some aspects of ethics we argue that it is not possible to understand fully an individual s compliance decisions without considering in some form these ethical dimensions specifically we argue here that there is much direct and indirect evidence that ethics differ across individuals and that these differences matter in significant ways for their compliance decisions we then put this in the larger context of the inability of the standard neoclassical paradigm to explain compliance of at least some individuals and we suggest several possible avenues by which theory can be expanded to incorporate ethics we conclude by arguing that a full house of compliance strategies is needed to combat tax evasion strategies that include the traditional enforcement paradigm suggested by and consistent with neoclassical theory a less traditional service paradigm that recognizes the important role of a kinder and gentler tax administration in encouraging compliance and importantly a new trust paradigm that is built on the foundation of ethics in which the tax administration must recognize that it can erode the ethics of taxpayers by its own decisions

migration and wage effects of taxing top earners evidence from the foreigners tax scheme in denmark this paper analyzes the eects of income taxation on the international migration and earnings of top earners using a danish preferential foreigner tax scheme and populationwide danish administrative data this scheme introduced in 1991 allows new immigrants with high earnings to be taxed at a preferential at rate for a duration of three years we obtain two main results first the scheme has doubled the number of highly paid foreigners in denmark relative to slightly less paid and therefore ineligible foreigners this translates into a very large elasticity of migration with respect to 1 minus the average tax rate on foreigners between 1 5 and 2 second we nd compelling evidence of a negative eect of the scheme induced reduction in the average tax rate on pre tax earnings of foreign migrants at the individual level this nding can be rationalized by a matching frictions

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