individual taxpayer response to tax cuts 1982 1984 with implications for the revenue maximizing tax rate abstract this paper measures the response of taxpayers to the u s personal rate reductions from 1982 to 1984 a baseline income distribution is created to describe what level and distribution could be expected in the absence of tax changes comparison of this baseline with actual tax return data shows that at least one sixth and probably one quarter of the revenue ascribable to the rate reductions was recouped by changes in taxpayer behavior the data also show that federal income tax revenue would have been maximized at a tax rate of about 35 percent and total income tax revenue maximized at a total tax rate of about 40 percent

the quality effect does financial liberalization improve the allocation of capital abstract we document evidence of a quality effect of financial liberalization on allocative efficiency as measured by dispersion in tobin s q across firms we predict that financial liberalization by equalizing access to credit is associated with reduced variation in expected marginal returns we test this prediction using a new financial liberalization index and firm level data for five emerging markets india jordan korea malaysia and thailand we find robust evidence that financial liberalization rather than financial deepening is associated with improved allocative efficiency

competitive targeted advertising with price discrimination this paper investigates the eects of price discrimination by means of targeted advertis ing in a duopolistic market where the distribution of consumers preferences is discrete and where advertising plays two major roles it is used by rms as a way to transmit relevant information to otherwise uninformed consumers and it is used as a price discrimination device we compare the rms optimal marketing mix advertising and pricing when they adopt mass advertising non discrimination strategies and targeted advertising price discrim ination strategies if rms are able to adopt targeted advertising strategies we nd that the symmetric price equilibrium is in mixed strategies while the advertising is chosen deter ministically our results also unveil that as long as we allow for imperfect substitutability between the goods rms do not necessarily target more ads to their own market in par ticular rms optimal marketing mix leads to higher advertising reach in the rival s market than in the rms own market provided that advertising costs are su ciently low in relation to the consumer s reservation value the comparison of the optimal marketing mix under mass advertising strategies and targeted advertising strategies reveals that targeted adver tising might constitute a tool to dampen price competition in particular if advertising costs are su ciently low in relation to the value of the goods we obtain that average prices with non discrimination mass advertising are below those with price discrimination and targeted advertising regardless of the market segment accordingly when i goods are imperfect substitutes ii advertising is not too expensive and iii targeted advertising constitutes an eective price discrimination tool price discrimination through targeted advertising may be detrimental to social welfare since it boosts industry pro ts at the expense of consumer surplus

political institutions and central bank independence a cross country analysis using three quantitative measures of central bank independence we apply ols and tsls regression methods to investigate the possible correlation between political liberty political instability and central bank independence for a sample of western democracies and highly democratic developing countries we show that cukierman s legal independence index is positively correlated with political freedom and regime political stability it is negatively correlated with party political stability for a sample of developing countries that excludes dictatorships we show that a special index of legal central bank autonomy is positively associated with political freedom and political stability finally we observe that for the same sample of nations the turnover index of central bank independence is not sensitive to our political variables

financial reforms and income inequality abstract using a panel of 62 countries for 1973 2005 we assess the impact of financial reforms on income inequality we find that removal of policies towards directed credit and excessively high reserve requirements and improvements in the securities market reduce inequality

taxing times taxation divided societies and the informal economy in northern nigeria this paper challenges the notion that taxing the informal economy provides a mechanism for increasing popular political voice and rebuilding the social contract it contends that current arguments for taxing the informal economy suffer from a eurocentric understanding of taxation and state formation and a fiscally essentialist and undifferentiated notion of the informal economy drawing on fieldwork in northern nigeria this paper shows that history gender wealth and ethno religious identity influence how taxing the informal economy shapes governance outcomes evidence from nigeria suggests an inverse relationship between informal economy taxation and political voice posing the risk that increased taxation will exacerbate social divisions rather than rebuild the social contract

industry and firm specific factors of innovation novelty this article investigates the underlying factors that might shape the firm s choices with respect to degrees of innovation novelty using a sample of 2983 firms observed under the portuguese community innovation survey we assess the relative relevance of a set of firm and industry specific factors in explaining firms choices about incremental or radical innovation the results indicate that both the firm s idiosyncratic historical factors giving rise to heterogeneous r d capabilities and the industry context have power to shape the firm s innovation choices even though firm specific factors appear to be more powerful the estimated impacts on firm s innovation novelty are nonetheless significantly moderated by the type of firm and industry

financial development economic growth and banking sector controls evidence from india this paper uses newly collected data from the reserve bank of india to examine the effects of various types of banking sector controls on the process of financial deepening with the exception of a lending rate ceiling these controls are found to influence financial deepening negatively independently of the well known effect of the real interest rate exogeneity tests suggest that financial deepening and economic growth are jointly determined thus policies which affect financial deepening may also have an influence on economic growth the role of banking sector controls in the process of economic development has received considerable attention in the literature the traditional approach due to mckinnon i973 and shaw i973 postulates that government intervention in the pricing and allocation of loanable funds dubbed financial repression inhibits financial development by depressing real interest rates see

spend it like beckham inequality and redistribution in the uk 1983 2004 a main activity of the state is to redistribute resources standard political economy models predict that a rise in inequality will lead to more redistribution this paper shows that for the uk in the period 1983 2004 a plausibly exogenous rise in income inequality has not been associated with increased redistribution we explore this example of the paradox of redistribution using attitudinal data we show that standard political economy models of the individual demand for redistribution do have explanatory power but that other attitudes and beliefs are also very important moreover these attitudes and beliefs change quite quickly so are very important in explaining variation in the demand for redistribution

toward a theory of regulation for developing countries following jean jacques laffont s lead the efficient operation and expansion of infrastructures in developing countries is crucial for growth and poverty reduction however recent reforms aimed at improving the performance of these sectors have had limited success evidence suggests that in many instances this was because the traditional regulatory theory relied on by policymakers was not suitable for the institutional context in developing countries this article surveys more recent theoretical work focusing on problems with regulation in these countries at the heart of the survey is the work of jean jacques laffont who in the last decade of his life set about developing a theoretical framework for regulation in developing countries we consider the implications of his work which focused on the key institutional limitations faced in developing countries we then discuss where experience suggests that there are important omissions from this modeling bringing in extensions and alternative approaches pursued by other authors we conclude by summarizing the key ways in which regulatory policy will be different when institutions are weak overall we find that an understanding of the institutional context and its implications are crucial when designing a regulatory framework for developing countries

income inequality and financial reform in asia the role of human capital we investigate whether financial reform can reduce income inequality in asia with particular emphasis on the role of human capital extending galor and zeira 1993 we demonstrate that financial reform is effective in reducing income inequality and the effect is more profound in a country with higher human capital using the data for 18 countries in asia the region with the most promising financial reform we confirm our theoretical finding in addition among disaggregated financial reforms lift of credit control better banking supervision and security market development seem to be significantly associated with reduction of income inequality

long term drivers of taxation in francophone west africa 1893 2010 abstract which factors have driven fiscal revenue in sub saharan africa in the long run we address this question by studying quantitatively the long term relationship between fiscal outcomes economic expansion and external dependency in four francophone west african countries benin cote d ivoire niger and senegal between 1893 and 2010 using panel co integration modelling we find a long term relationship between on the one hand tax revenue and local economic development proxied by international trade and on the other hand tax revenue and developments of the economy and taxation in the former colonizing power france the results indicate that economic expansion has been a significant factor in driving the long term development of tax revenue in west africa just as it was in historical europe but also point to the historical vulnerability and external dependency of the fiscal systems of the four west african countries we suggest that the wider implication of these results is that they point to the importance of deepening our understanding of how domestic contexts interact with external economic and institutional external forces to shape african fiscal systems in contrast to factors such as inter state warfare that are ubiquitous in narratives of historical european taxation and state development

taxation and political mobilization evidence from andhra pradesh abstractthis article empirically investigates whether there are differences in a region s taxation burden on the basis of support for the centralized state government in the indian state of andhra pradesh using randomness introduced by close election outcomes this article finds that the government collected less tax revenues where opposition parties were more successful the decline in tax revenue was most likely targeted at agricultural producers and a similar pattern is found in other available agricultural policies these results are consistent with a model in which it is optimal for a centralized government to catch up in elections it trails as opposed to bolstering existing leads furthermore these results suggest that taxation responds to electoral pressures and that agricultural producers in particular are targeted during times of political competition

public service innovation and multiple institutional logics the case of hybrid social enterprise providers of health and wellbeing public sector organisations are confronted with growing health and social care needs in combination with severe resource constraints prompting interest in innovative responses to such challenges public service innovation is poorly understood particularly where innovators must navigate between the norms practices and logics of public private and civil society sectors we contribute to the understanding of how innovating hybrid organisations are able to creatively combine co existing logics case study evidence from newly established social enterprise providers of health and wellbeing services in england is utilised to examine how innovations are shaped by i an incumbent state or public sector logic and two challenger logics relating to ii the market and increasing competition and iii civil society emphasising social value and democratic engagement with employees and service users the analysis shows how a more fluid and creative interplay of logics can be observed in relation to specific strategies and practices within organisations these strategies relate to the empowerment of staff to be creative financial management and knowledge sharing and protection the interplay of logics shaping social innovation is also found in relationships with key stakeholders notably public sector funders service users and service delivery partners implications are drawn for innovation in public services and hybrid organisations more broadly

no taxation without information deterrence and self enforcement in the value added tax abstract claims that the vat facilitates tax enforcement by generating paper trails on transactions between firms contributed to widespread vat adoption worldwide but there is surprisingly little evidence this paper analyzes the role of third party information for vat enforcement through two randomized experiments among over 400 000 chilean firms announcing additional monitoring has less impact on transactions that are subject to a paper trail indicating the paper trail s preventive deterrence effect this leads to strong enforcement spillovers up the vat chain these findings confirm that when taking evasion into account significant differences emerge between otherwise equivalent forms of taxation jel d83 h25 h26 k34 o17

infrastructure and public utilities privatization in developing countries should governments in developing countries promote private ownership and deregulated prices in noncompetitive sectors or should they run publicly owned firms and regulate prices at the expense of rents to insiders a theoretical model is used to answer these normative questions the analysis focuses on the tradeoff between fiscal benefits and consumer surplus during privatization of noncompetitive sectors privatization transfers control rights to private interests and eliminates public subsidies yielding benefits to taxpayers at the cost of increased prices for consumers in developing countries where budget constraints are tight privatization and price liberalization may be optimal for low profitability industries but suboptimal for more profitable industries and once a market has room for more than one firm governments may prefer to regulate the industry without a credible regulatory agency regulation is achieved through public ownership

do financial reforms help stabilize inequality abstract we explore the relationship between financial reforms and income inequality using a panel of 29 countries in 1975 2005 we extend panel unit root tests to allow for the presence of some financial reform covariates and further suggest an associated but novel semi parametric approach results demonstrate that although both gross and net gini indices follow a unit root process this picture can change when financial reform indices are accounted for in particular while gross gini coefficients are generally not stabilized by financial reforms net measures are more likely to be thus financial reforms enacted in the presence of a strong safety net would seem preferable

capital account liberalization and income inequality this article makes both a theoretical and an empirical contribution to the literature on financial liberalization and income inequality in the first part we develop a tractable model that features agents with varying investment abilities and a banking sector there are two possible interventions to liberalize the banking sector first a reduction in reserve requirements and second an increase in the amount of foreign funds that can be used to finance domestic loans financial liberalization leads to enhanced banking sector efficiency and adjustments in interest rates affecting income of investors and savers and therefore income inequality theoretically the impact of financial liberalization on income inequality is ambiguous yet the model suggests that financial liberalization will improve income distribution in countries where financial depth is high our empirical estimates confirm this conditional effect more precisely the estimates suggest that capital account liberalization only tends to lower income inequality if the level of financial depth as measured by private credit over gdp exceeds 25 percent

taxation and household portfolio composition us evidence from the 1980s and 1990s abstract this paper explores the relationship between household marginal income tax rates the set of financial assets that households own and the portfolio shares accounted for by each of these assets it analyzes data from the 1983 1989 1992 1995 and 1998 surveys of consumer finances and develops a new algorithm for imputing federal marginal tax rates to households in these surveys the empirical findings suggest that marginal tax rates have important effects on asset allocation decisions the probability that a household owns tax advantaged assets such as tax exempt bonds or assets held in tax deferred accounts is positively related to its tax rate on ordinary income in addition the portfolio share invested in corporate stock which is taxed less heavily than interest bearing assets is increasing in the household s ordinary income tax rate holdings of heavily taxed assets such as interest bearing accounts decline as a share of wealth as a household s marginal tax rate increases

on the marginal welfare cost of taxation this paper develops a rigorous partial equilibrium analysis of the determinants of margin al welfare cost mwc of taxes on labor earnings it shows that four key parameters interact to determine the magnitude of mwc using aggregate data and plausible ranges of values for the parameters mwc can vary from under 10 percent to more than 300 percent of marginal tax revenue intermediate parameter values sugge st mwc is in the 25 50 percent range however the more extreme estimates cannot be ruled out on the basis of available evidence suggesting that mwc cannot yet be copyright 1987 by american economic association

multi fibre arrangement and wage inequality firm and state level evidence from india and a theoretical model the phased elimination of multi fibre arrangements mfa for textile and apparel has been one of the most compelling trade policy reforms that removed a system of bilateral quotas the reform brought in significant changes in the industrial structures for exporters from the south including india has the labour intensive high employment textile and clothing industry in india benefited from this global move towards freer trade for india the industry has witnessed unprecedented market concentration of export oriented firms firm level empirical estimate illustrates that workers in the export oriented firms in india are adversely affected due to withdrawal of quota accumulation of net fixed assets and growth of sales impart positive impact on firm level wages that cannot outweigh negative impact due to fall in exports we also find negative impact of profit on aggregate wage bill for the industry with firms spread over 11 major states in india we show that the mean deviation of industry level wage is positively and significantly associated with mean deviation of the number of factories at the state level and negatively with profit finally a brief analytical exercise obtains conditions under which joint withdrawal of quota and import tariff could raise the aggregate labour income in developing countries in general

assessing the relative performance of u k university technology transfer offices parametric and non parametric evidence abstract we present evidence on the relative performance of u k university technology transfer offices ttos using data envelopment analysis dea and stochastic frontier estimation sfe u k ttos are found to exhibit low levels of absolute efficiency there also appear to be decreasing returns to scale implying that ttos may need to be reconfigured into smaller units the development of regionally based sector focused ttos is also advised consistent with qualitative evidence from u s ttos we find that there is a need to upgrade the business skills and capabilities of u k tto managers and licensing officers

nonlinear monetary policy reaction functions in large emerging economies the case of brazil and china this article estimates monetary policy rules for two key emerging market economies brazil and china it analyses whether the monetary authority reacts to changes in economic activity financial markets monetary conditions the foreign exchange market and the commodity price we assess the importance of nonlinearity using a smooth transition regression str model using quarterly data over the time period 1990 1 to 2008 4 we find that considerations about the output gap and the real effective exchange rate in the case of brazil and the inflation rate for china explain the nonlinear adjustment of the central bank rate moreover the results suggest that central banks pursue a target range for the threshold variable rather than a specific point target in the case of china the mccallum rule shows that the gdp growth the interest rate and the commodity price drive the response of the growth rate of the relevant monetary aggregate

from the static to the dynamic some problems in the theory of taxation abstract this paper considers problems and issues that arise when we attempt to extend the static theory of taxation and production planning to a dynamic context and to combine that theory with theories of growth the reasons dynamic theory is less developed include problems with the analytical tractability of even those dynamic models which attempt to retain the basic structure of the static model furthermore difficult and interesting issues arise in a dynamic context which are either not present or are much less severe in the static theory special attention is paid to these new issues and the difficulties they pose

fiscal adjustments labour market flexibility and unemployment using a panel of 17 countries for 1978 2009 we find that tax driven consolidations increase unemployment by 0 25 percentage points labour market flexibility mitigates this a one point rise in the flexibility index reduces youth long term unemployment by 0 6 0 7 1 8 2 2 percentage points

how do business model and health technology design influence each other insights from a longitudinal case study of three academic spin offs abstract academic spin offs often lack business expertise face uncertainties regarding their innovation and their markets and do not have a clear idea of how their product will create value in spite of this vagueness academic entrepreneurs must articulate a business model and rapidly establish trustworthy relationships with potential users purchasers and capital investors one may thus wonder how their technology development process is influenced by the long term expectations of their putative customers as well as the short term requirements of capital investors this longitudinal case study examines how the business models of three canadian health technology spin offs sought to address the value expectations of clinical users and capital investors how tensions were resolved and the impact this had on technology design we describe the synergistic readjustments drastic reconfiguration and mismatch between business model and technology design we observed our discussion highlights the mediating mechanisms by which business models and technology design influence each other clarifying why the initial value proposition of the spin offs was either refined or reframed beyond confirming the importance of differentiating business models in the health technology industry our study suggests that it is not only who makes decision that matters but also how stakeholders value expectations get embedded in a spin off s value proposition

the impact of family income on child achievement evidence from the earned income tax credit comment abstract in a recent article in the american economic review dahl and lochner 2012 use changes in the earned income tax credit to estimate the causal effect of family income on child achievement their instrumental variable iv estimates imply that a 1 000 increase in income raises combined math and reading test scores by about 6 percent of a standard deviation i document a variable coding error correcting this error reduces the iv estimates by 32 percent correcting this error does not change the qualitative conclusions of the study jel h24 h31 i21 i38 j13

organizing the entrepreneurial hospital hybridizing the logics of healthcare and innovation contemporary research hospitals occupy a vexed position in the policy landscape on the one hand as healthcare providers they must abide by the logic of healthcare policy which expects health research to support improved health outcomes and high quality healthcare systems on the other hand as research facilities they are beholden to the logic of innovation policy which seeks to advance research driven science and technology derived innovations where industry is the key customer and client at the intersection of these policy logics the research hospital must orchestrate a range of interests that may not always coexist harmoniously through a detailed case study of a canadian research hospital we illustrate organizational efforts to hybridize healthcare and innovation logics the need to be more business like and the expected financial and reputational rewards encourage acceptance of a mandate for technology transfer and commercialization as well there is hope that the entrepreneurial turn can serve the hospital s own mission by prioritizing the needs of patients and the organization itself as a user of its own innovations further insofar as successful technology transfer and commercialization is a transformative force it is expected to enable the research hospital to achieve its goal of translational and impactful health research as we illustrate there is much optimism that these hybridizing efforts will produce a successful cross yet the trajectory of change in the context of mixed logics is necessarily uncertain and other hybrid futures cannot be foreclosed more sterile or monstrous outcomes remain possible with potentially significant implications for the intellectual economic and health benefits that will arise as a result

finance inequality nexus the long and the short of it financial development affects income inequality differently in the short and in the long term investigating oecd countries from 1870 2011 we find in the short run an improvement in financial development tends to reduce inequality while in the long run more finance contributes to more inequality the short run effect concurs with theories advocating financial development increases the availability of financial services primarily for the poor however this effect becomes nil within a few years results thus imply that policies aimed at reducing inequality through improving access of the poor to finance need to be carefully designed to ensure longevity of impact

the effect of marginal tax rates on taxable income a panel study of the 1986 tax reform act this paper uses a treasury department panel of more than 4 000 taxpayers to estimate the sensitivity of taxable income to changes in tax rates on the basis of a comparison of the tax returns of the same individual taxpayers before and after the 1986 tax reform the analysis emphasizes that the response of taxable income involves much more than a change in the traditional measures of labor supply the evidence shows an elasticity of taxable income with respect to the marginal net of tax rate that is at least one and could be substantially higher the implications for recent tax rate changes are discussed

aid nontraded goods and the transfer paradox in small countries this paper constructs a model of the transfer paradox for a small open economy with nontraded goods it demonstrates that increased production of nontraded goods can change their domestic price so as to offset the otherwise beneficial effect of aid and under certain conditions to create a transfer paradox even in a small country the model is estimated with time series data for 44 aid dependent countries for the period 1970 90 the results support the model and show that the nontraded goods expansion effect is more likely to cause immiserization than harry g johnson s 1967 tariff distorting export displacement effect

income tax compliance in india an empirical analysis abstract aggregate data are used to study determinants of income tax revenues and taxpayer compliance in india during 1965 1966 to 1992 1993 the estimates show that both revenues collected and compliance were significantly affected by tax structure marginal tax rates and exemption limit in addition inflation as well as declining assessment intensity had a significant negative effect while traditional enforcement tools searches penalties and prosecution activity had only a limited effect best practice enforcement assessment and tax structure policies could have yielded at most a 90 revenue increase leaving india s income tax performance below the average of countries with similar gdp per capita thorough reform of tax administration is therefore needed to raise income tax collection in india to international standards

tax me if you can ethnic geography democracy and the taxation of agriculture in africa it is typically assumed that african leaders enact policies that benefit their ethnoregional group using all types of patronage crop production and political power are geographically concentrated in many african countries and this paper exploits this overlap to cast doubt on this conventional wisdom it shows using data on 50 country crop combinations that cash crop farmers who are ethnically identified with the head of state face higher taxes furthermore democratic regimes impose lower taxes this paper shows that farmers who have few alternatives face higher taxes african leaders have used local intermediaries to exert control over the countryside and to ensure that farmers do not support alternative candidates it suggests that as leaders are better at selecting and monitoring these intermediaries in their home areas they can extract more from the majority at home than abroad using taxes on cash crops which are regionally but not individually targetable

income inequality poverty and the liquidity of stock markets abstract using a broad cross sectional sample of countries this study tests whether stock market liquidity affects the level of income inequality after holding a variety of factors constant including traditional measures of financial development results show that liquidity in a country s stock market is negatively related to various measures of inequality we find that this relationship does not exist in the most developed countries instead our results are stronger in underdeveloped and moderately developed countries in addition we find that stock market liquidity is negatively associated with poverty rates in our final set of tests we attempt to identify the mechanism through which liquidity reduces inequality after decomposing wage growth into the portion that is driven by stock market liquidity and the portion that is orthogonal to liquidity we find strong evidence that liquidity induced wage growth drives the reduction in both inequality and poverty

estimating border tax evasion in mozambique abstract the relationship between border tax rates and evasion is examined for mozambique using the methodology developed by fisman and wei 2004 we find that high tax rates are associated with high levels of under reporting of import values and that tax rates have a strong and positive effect on tax evasion results also strongly confirm the presence of fraudulent classification of merchandise into lower taxed product categories finally analysis of the revenue implications of lower trade taxes finds that the revenue curve is quite flat but remains upward sloping with respect to the tax rate when only evasion is considered

the effect of income taxation on labor supply when deductions are endogenous this paper extends the standard static model of labor supply and taxation to the case where people are able to legally avoid taxes through the use of itemized deductions tax deductible expenditures are treated as a hicksian composite good with a price for those who decide to itemize proportional to one minus the marginal tax rate estimation of the commonly used linear labor supply model extended to incorporate the additional composite good on a cross section of prime aged married men suggests that tax deductible consumption is an uncompensated substitute for leisure and complement with labor the impact of taxes through the relative price of deductible expenditures appears to be much stronger than through the net wage copyright 1992 by mit press

optimal dynamic carbon taxes in a climate economy model with distortionary fiscal policy how should carbon be taxed as a part of fiscal policy the literature on optimal carbon pricing often abstracts from other taxes however when governments raise revenues with distortionary taxes carbon levies have fiscal impacts while they raise revenues directly they may shrink the bases of other taxes e g by decreasing employment this article theoretically characterizes and then quantifies optimal carbon taxes in a dynamic general equilibrium climate economy model with distortionary fiscal policy first this article establishes a novel theoretical relationship between the optimal taxation of carbon and of capital income this link arises because carbon emissions destroy natural capital they accumulate in the atmosphere and decrease future output consequently this article shows how the standard logic against capital income taxes extends to distortions on environmental capital investments second this article characterizes optimal climate policy in sub optimal fiscal settings where income taxes are constrained to remain at their observed levels third this article presents a detailed calibration that builds on the seminal dice approach but adds features essential for a setting with distortionary taxes such as a differentiation between climate change production impacts e g on agriculture and direct utility impacts e g on biodiversity existence value the central quantitative finding is that optimal carbon tax schedules are 8 24 lower when there are distortionary taxes compared to the setting with lump sum taxes considered in the literature

taxation base in developing countries abstract informal sectors are larger in developing countries than in rich countries this is a result of higher fixed costs of entry into the formal economy in developing countries we show that raising barriers to entry is consistent with a deliberate government policy for raising tax revenue by generating market power and hence rents for the permitted entrants market entry fees foster the emergence of large taxpayers the rents can be readily confiscated by the government through entry fees and taxes on profits at a low administrative cost the relevance of the theory is assessed with a sample of 64 countries empirical analysis supports the results of the paper

a simple model of endogenous tax reform abstract this paper presents a model of optimal taxation that is useful for understanding governments incentives to switch from wage to consumption taxation the key ingredient is the fact that governments cannot precommit policy although under precommitment governments would tax only wages there is an ex post incentive to switch to the consumption tax as savings grow numerical examples for a nested ces utility function find that for reasonable parameter values equilibrium features a switch to consumption taxation in particular the model produces this tax reform when parameterized as in auerbach and kotlikoff s 1987 study

regulation competition and liberalization in many countries throughout the world regulators are struggling to determine whether and how to introduce competition into regulated industries this essay examines the complexities involved in the liberalization process while stressing the importance of case specific analyses this essay distinguishes liberalization policies that generally are procompetitive from corresponding anticompetitive liberalization policies

majority choice of tax systems in single and multi jurisdictional economies abstract we examine majority choice of tax instruments in an economy with heterogeneous households in our framework majority voting equilibrium exists despite the multidimensional policy choice set we examine single and multi jurisdictional economies we identify five competing incentives that influence choice of tax instruments equilibria generally entail a mixture of tax types with multiple jurisdictions strong reliance on head taxation in rich communities arises to deter poorer households from immigrating in spite of local incentives to use alternative tax instruments to redistribute wealth if relocation costs preclude inter community mobility the equilibrium tax system is fundamentally affected with redistribution incentives then dominating choice of instruments and tax rates limiting or eliminating head taxation fundamentally alters stratification public good provision levels and tax systems

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

lower tax progression longer hours and higher wages the impact of tax reforms that decrease income tax progression is analysed in an equilibrium search model with wage bargaining and endogenous individual working hours working hours are either bargained together with the hourly wage case 1 or determined solely by workers after bargaining over the wage case 2 in both cases reducing tax progression increases working hours of employed and more interestingly unambiguously increases wages and unemployment wages and unemployment rise more and working hours and production less in case 1 compared to case 2 probably making case 2 countries best suited for such tax reforms

halving global poverty the goal of central importance to this paper is to cut in half the proportion of people living below 1 a day from around 30 percent of the developing world s population in 1990 to 15 percent by 2015 based on population projections in 1990 this would correspond to around one billion people exiting poverty this paper begins by discussing poverty trends on a global scale where the poor are located in the world and how their numbers have been changing over time it then discusses the relationship of economic growth and income distribution to poverty reduction finally it suggests an evidence based agenda for poverty reduction in the developing world full text available at official url

taxation wage controls and the informal sector abstract in this paper we study the effects of taxation and wage controls in a developing economy with an informal sector for that purpose we build a model with firm heterogeneity in which a formal and an informal sector endogenously emerge in some productive branches of the economy based on the assumption that the marginal cost of tax and regulation evasion increases with the size of the firm our model offers an explanation for the observed discontinuity in the distribution of firms size the missing middle three forms of dualism scale wage and evasion consistent with market segmentation are obtained the model accounts for the presence of waiting unemployment that seems particularly pervasive in urban regions a computable general equilibrium cge model for cameroon is built incorporating these features various reforms of the tax and regulation system are simulated and their effects on the extent of the informal sector are analyzed

public goods hidden income and tax evasion some nonstandard results from the warm glow model abstract a large literature explores crowd out in situations where public goods are jointly provided work in this area typically depicts a tax system where individuals take taxes as given but in some settings such as those in developing economies efforts to evade or avoid taxes may be widespread using the canonical warm glow model this paper considers joint public good provision in a setting where individuals can evade taxes by hiding their income the model s implications change significantly in this setting with hidden income stronger warm glow will lead to greater crowd out not less using research on crowd out and inter family transfers i present suggestive evidence that the model s results may help to reconcile divergent estimates of crowd out in the literature

the design of fiscal reforms in revenue constrained developing countries while generalisation is perilous there are many especially small developing countries for which sales taxes and turnover taxes are fairly negligible as revenue sources and for which import duties and export taxes particularly the former are leading revenue sources for evidence from the early i980s see tanzi i987 and greenaway and milner i990 this observation is unsurprising when account is taken of the administrative constraints to which many developing countries are subject sales taxes can be difficult to collect not to mention a complex tax like vat income tax is largely infeasible and often has to take a simple form such as a payroll tax confined in practice to public and large company employment some taxes which would be assumed to be eminently feasible in industrial economies may not generate as much revenue as might be supposed in a developing country for instance tax disks which the law may require heavy goods vehicles to carry may generate a flow of bribes to police and other officials if these are wise enough to set the bribe at a modest level making it cheaper to pay bribes than to buy a disk a cynic might say that the bribes are an unofficial source of revenue if their existence enables the state to get away with paying its officials absurdly low salaries one would have to hope if that argument is accepted that the officials do something socially useful apart from stopping heavy goods vehicles such considerations make it interesting to consider the design of public finance for a country severely constrained in its choice of what musgrave called tax handles that is types of tax instrument which it may practically employ the existing literature for which newbery and stern i987 provides an excellent review throws some light on this issue but the problem is seldom treated explicitly an exception would be dreze and stern i985 whose highly abstract and general treatment of cost benefit analysis theory can be seen to incorporate principles of public finance which fully cover the restricted policy choices which i have in mind because the approach of these authors is so general however it is not easy to extract conclusions for tax design in specific cases this is no criticism of the paper of course as the argument is addressed to cost benefit analysis generally speaking theory has developed in the direction of sophisticated and complex tax systems the next section discusses why this is so from the point of view of theory yet ideal tax systems would be difficult to implement in many developing countries as i shall treat tariffs as a highly feasible revenue

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

fiscal incentives and policy choices of local governments evidence from china abstract this paper examines how fiscal incentives affect the policy choices of local governments in the context of china based on exogenous changes in the intergovernmental revenue sharing scheme we construct a simulated instrumental variable to resolve the endogeneity problem we find evidence that local governments shifted their efforts from fostering industrial growth to urbanizing china i e to developing the real estate and construction sectors when their retention rate of enterprise tax revenue was reduced the increase from the new revenue source compensated for half of the losses in revenue that resulted from the reassignment of fiscal rights the reassignment had also the effect of retarding the industrial growth of domestically owned firms in particular

fiscal consolidation and financial reforms we use a rare events logistic regression model as well as traditional probit and logit models to investigate the impact of fiscal consolidation on the likelihood of financial reforms for a panel of 17 countries over the period 1980 2005 we show that large austerity plans mainly implemented through spending cuts rather than tax hikes promote financial reforms by considering reforms affecting specific areas of the financial sector we find that the banking sector reforms and domestic finance reforms are more likely to occur when fiscal adjustments are put in place interestingly while banking sector reforms are mainly prompted during periods of tax driven consolidations spending cuts driven consolidation packages seem to propel the implementation of domestic finance reforms finally we show that higher inflation lower degree of trade openness a deterioration of financial conditions and to some extent a fall in the degree of competitiveness enhance the probability of financial reforms

agricultural pricing and public investment abstract aggregate agricultural supply is price inelastic but responsive to investment in agricultural infrastructure irrigation roads research extension thus the government should tax agriculture and finance infrastructure although unlikely to pay for itself directly it will increase taxable agricultural surplus but by raising rural living standards and therefore the supply price of urban labour it reduces urban tax revenue its marginal social product is therefore overstated when measured at world prices though understated at distorted agricultural prices with scale economies in industry the case for taxing and investing in agriculture is strengthened it may allow the economy to escape stagnation

on tax efforts and colonial heritage in africa abstract one commonly observed phenomena about taxation in africa are regional differences and the fact that southern african countries have higher levels of shares of taxation in gdp this article argues that the major source of differences in tax effort is the colonial histories of various countries using standard measures of tax effort in a panel data framework and dividing colonial africa along forms of incorporation into the colonial system it shows that african countries and others with similar colonial histories have higher levels of tax effort however the difference disappears when we control for the colonial factor these results hold under different model specifications

taxes and bribery the role of wage incentives this paper presents a simple model to evaluate alternative payment schemes for tax inspectors in the presence of corruption we consider problems of both moral hazard which arises because taking bribes cannot be observed without costly monitoring and adverse selection since not all potential tax inspectors can be identified as being honest or dishonest we identify three wage regimes first one could pay the same wage that a tax inspector could earn elsewhere his reservation wage second one could pay a wage which solves the moral hazard problem i e deters bribery this we call an efficiency wage by analogy with recent models examined i n macro economics third the government could pay a wage below the reservation wage at which only the dishonest become tax inspectors the capitulation wage we make precise the conditions under which each yields the greatest amount o f tax revenues net o f administrative costs many countries in the developing world are undergoing structural adjustment programmes which require fundamental fiscal changes outside agencies advise restoration of budget balance a task which involves expenditure cuts and tax increases the treatment of public employee pay scales often poses a particular dilemma i n this process wages and salaries are a significant component of government expenditures and one important question concerns the extent to which wages rather than employment cuts should be used to save money there is sometimes a reluctance to advocate wage cuts stemming in part from a feeling that this might impair the performance of the public sector hence tanzi 1990 argues that a policy of wage cutting is likely to increase the inefficiency of public sector employees especially at a time when the public sector is expected to play a larger role in restructuring the economy p 16 in the context of tax collection the issue is particularly pressing given the need to raise more tax revenues a reduction in efficiency in this branch of the government i s likely t o mean that fewer returns are processed and when individuals living standards are squeezed their incentive to accept bribes in lieu o f collecting taxes i s increased o n this count i t i s even sometimes suggested that wages of tax inspectors should be increased to aid the effort to the comments of henry bienen john hey and two anonymous referees have been helpful in revising this paper the authors are also grateful t o the john m olin program for the study o f economic organization and public policy at princeton university and the pew charitable trusts for financial support mclaren also acknowledges support from the international finance section of princeton university none of the above should be implicated in any way see for example goode 1984 chapter 1 3 and gould and amaro reyes 1983

why poor countries rely mostly on redistribution in kind abstract we present a model in which the crucial distinction between rich and poor countries is that governments in rich countries have access to a more productive tax collection technology than governments in poor countries since the tax collection technology in poor countries is poor the quality of the public service is low therefore many households at the top of the income distribution opt out of the public service the median voter takes this into consideration and allocates a larger share of the public budget to redistribution in kind public service than to redistribution in cash

agricultural taxation in developing countries a survey of issues and policy this study surveys the experience of agricultural taxation in developing countries in the context of the ongoing policy debate about the tax structure and administration affecting agricultural producers using the examples of a number of countries it analyzes the conceptual and practical problems associated with different tax regimes governments in most countries have reduced indirect export taxes on agricultural producers however the revenue from direct taxes on farmers has not increased a major problem in most countries has been the measurement of actual agricultural income different measures for presumed income have been used with varying success they seem to have the most potential for increased revenue in many countries but their effective implementation is constrained by the political and administrative considerations

financial development financial structure and income inequality in china using panel data of 23 provinces during the period 1996 2012 this paper investigates the impacts of financial development and structure on income inequality in different administrative districts urban rural and overall in china the results produced by the dynamic generalised method of moments estimator provide some evidence for a linear and inverse u shape relationship between financial development and income inequality and increasing the relative importance of financial markets to banks helps to reduce income inequality furthermore the results of panel threshold regressions show that the benefits of financial development only occur if the stock market activity has reached a threshold level and disappear if the stock market capitalisation has reached a certain scale meanwhile the impact of the financial structure weakens as the financial development expands and the proportion of financial markets increases we also find that the impacts of financial development and structure on rural income inequality are stronger than those on urban income inequality

the political economy of financial regulation evidence from u s state usury laws in the 19th century financial regulation was as hotly debated a political issue in the 19th century as it is today we study the political economy of state usury laws in 19th century america exploiting the wide variation in regulation enforcement and economic conditions across states and time we find that usury laws when binding reduce credit and economic activity especially for smaller firms we examine the motives of regulation and find that usury laws coincide with other economic and political policies favoring wealthy political incumbents particularly when they have more voting power the evidence suggests financial regulation is driven by private interests capturing rents from others rather than public interests protecting the underserved we examine the motives and consequences of financial regulation to better understand the implications of regulation for financial development and economic growth while the current global financial crisis has reinvigorated the debate on financial regulation s effects and motives there is a long history of financial regulation and development we can examine to shed light on these issues specifically we study the political economy of financial regulation and its consequences through the lens of usury laws in 19th century america usury laws are arguably the oldest form of financial regulation mentioned in both the bible and the koran and dating back to ancient rome having long been

east asian economic performance miracle or just a pleasant surprise p ublication of the east asian miracle eam world bank 1993 appears to borrow a phrase to have generated more heat than light the eam analysed reasons for the economic success of the eight high performing asian economies hpaes hong kong indonesia japan malaysia republic of korea singapore taiwan and thailand the hope at least of neutral observers was that we would be able to derive lessons regarding effective economic policies from a study of the experiences of the successful east asian economies the general criticism of the report is that it tried to mould the hpaes experiences so that the lessons were consistent with bank policy in the process losing many distinguishing features of the eam more serious criticisms are that the report obfuscated and distorted the truth it is not our intention to reopen debate about the report fully aired in a special issue of world development april 1994 and rodrik 1994 we do wish to address three questions what were the distinguishing features of the east asian economic success that led some observers to claim a miracle what elements of economic policy contributed to their success and are such elements present in the economic policies proposed by the bank in for example adjustment programmes are there features of the hpaes that can be adapted to help design successful policies for other countries put succinctly what did they do that appears so good how did they do it and can others do it writing in 1998 it may appear irrelevant to talk of an east asian miracle as so many of the economies we consider have recently endured currency crises of varying degrees of severity current problems should not detract from the sustained and generally impressive growth achieved by these economies over the

the impact of family income on child achievement evidence from the earned income tax credit using an instrumental variables strategy we estimate the causal effect of income on children s math and reading achievement our identification derives from the large nonlinear changes in the earned income tax credit the largest of these changes increased family income by as much as 20 percent or approximately 2 100 between 1993 and 1997 our baseline estimates imply that a 1 000 increase in income raises combined math and reading test scores by 6 percent of a standard deviation in the short run test gains are larger for children from disadvantaged families and robust to a variety of alternative specifications jel h24 h31 i21 i38 j13