the political economy of conflicts over wealth why don t the rabble expropriate the rich the most striking feature of liberal democracies is the coexistence of large inequalities of wealth with a roughly egalitarian distribution of voting power so far most attempts to explain this have asked why don t the poor form a coalition to expropriate the rich this paper argues that this is not necessarily the best way to interpret the problem and attempts to provide an alternative unified political economic model that is more consistent with standard assumptions about voting this is done by studying what would happen if every possible coalition could form in a wealth distribution game among the main findings is that if the marginal contribution of every individual to production is increasing sufficiently there is a stable distribution of the product this may include the egalitarian distribution if individuals are not so valuable there is no stable distribution

the democratic political economy of progressive income taxation why do both left and right political parties typically propose progressive income taxation schemes in political competition analysis of this problem has been hindered by the two dimensionality of the issue space to give parties a choice over a domain that contains both progressive and regressive income tax policies requires an issue space that is at least two dimensional nash equilibrium in pure strategies of the standard two party game whose players have complete preferences over a two dimensional policy space generically fails to exist i introduce a new equilibrium concept for political games based on the fact of factional conflict within parties each party is supposed to consist of reformists militants and opportunists each faction has a complete preference order on policy space but together they can only agree on a partial order nash equilibria of the two party game where the policy space consists of all quadratic income tax functions and each party is represented by its partial order exist and it is shown that in such equilibria both parties propose progressive income taxation

the learning path of the hidden economy the tax burden and tax evasion in new zealand this paper considers the learning curve relationship between the aggregate tax rate and the relative size of the hidden economy in new zealand some simple non linear models are estimated so that the effects of changes in the effective tax rate on the underground economy can be simulated this study finds that about half of the hidden activity in new zealand is a learned response to changing opportunities and constraints in fiscal policy but this amount varies over the business cycle simulating a zero tax rate permits us to discover the natural rate of underground and criminal activity some partial lessons are drawn for taxation policy in that country

candidate reputations and the incumbency effect abstract a major shortcoming of the classical median voter model is that its central prediction convergence of platforms to the median voter s ideal is seldom observed one reason is that the classical model neglects the importance of voter expectations as a determinant of votes here we associate voters expectations about candidates with past as well as current candidate pronouncements and assume that incumbents whose actions are consistent with their reputations are perceived as less risky than challengers in equilibrium candidates choose distinct platforms typically neither adopts the median voter s ideal point either candidate may win depending on how well the incumbent s reputation reflects current voter tastes and how relatively risky the electorate perceives the challenger to be

war of attrition evidence from a laboratory experiment on market exit i introduction young industries often undergo a process of shakeout gort and klepper 1982 and klepper 1996 attracting excess firms and gradually shedding them over time more mature industries are likewise often forced to contract in the face of recession or product specific negative demand shocks when an overcrowded industry is forced to shrink which firms exit and which ones survive the conventional answer in economics is that overcrowded industries tend to shed inefficient firms and retain efficient ones we might call this survival of the most efficient a process analogous to natural selection that can adaptively improve the efficiency of industries over time nelson and winter 1982 fudenberg and tirole 1986 model firms exit decisions in overcrowded duopoly markets as wars of attrition and show that the intuition of survival of the most efficient has merit even if firms have little information regarding their costs relative to their competitors however the equilibrium of their game is complex involving a solution to a system of differential equations since neither fortune 500 chief executive officers in the naturally occurring markets nor undergraduate participants in laboratory markets deliberately solve differential equations when deciding whether or not to exit a declining market it is an open question as to how well fudenberg and tirole s rational reconstruction of the exit decision corresponds to the facts of how people make such decisions we report the results of a laboratory experiment designed to answer this question nearly 200 subjects in 16 sessions participated in a total of 3 800 wars of attrition based on fudenberg and tirole s model at the beginning of each period subjects were randomly paired and given a private cost draw that usually induced negative net per second payoffs in a shared market and positive net payoffs per second in monopoly subjects then decided in real time whether and when to exit the market never to return monotonic equilibrium strategy functions predict higher cost inefficient participant exit at an earlier time than their lower cost competitor that is the relatively efficient competitor survives in the market we find that fudenberg and tirole s model organizes our data surprisingly well especially considering its complexity we observe exit by the higher cost firm in 76 of cases when differences between the costs faced by firms are substantial the rate of efficient exit rises to nearly 100 the data on exit times are likewise quite close to the point predictions particularly in the crucial higher portion of the cost distribution that generally governs exit times the median deviation from equilibrium exit times falls to zero by the end and on average subjects earn payouts identical to those predicted in equilibrium our design permits tests of two other conjectures in fudenberg and tirole first our data supports fudenberg and tirole s core comparative static prediction that a decrease in the ex ante likelihood of actually being in a war of attrition leads to an increase in the speed of exit 1 second half of our sessions use costs framed as fixed costs suffered while in the market and half use costs framed as opportunity costs earned by exiting the market there is no evidence that this treatment variable affects exit behavior this isomorphism between gains and losses predicted by standard theory stands in stark contrast to evidence from previous individual decision making experiments suggesting asymmetries in how people react to potential losses and potential gains although wars of attrition have an important place in the game theoretic literature there are surprisingly few experimental studies directly relating to them 2 3 bilodeau childs and mestelman 2004 study a three player full information war of attrition framed as a volunteer game and report widespread failure of equilibrium predictions the predicted volunteer in a subgame perfect nash equilibrium only volunteers 41 of the time

racism xenophobia and redistribution we model political competition as a contest between parties that represent constituents and which announce policies in a two dimensional policy space the first dimension concerns the degree of redistribution and the second the race or immigration issue given the distribution of voter preferences on this space a political equilibrium is determined we study the effect that racist or anti immigrant preferences in the polity have on equilibrium values of the redistributive policy for the united states there is a substantial reduction in distribution below what it counterfactually would have been absent racism for the uk france and denmark there are effects of the same sign but with different magnitudes jel d70 d72 d30

wicksell lindahl and the theory of public goods wicksell s and lindahl s ideas on public goods and decisions are reviewed in light of later developments in the theoretical economics literature i begin by discussing their normative ideals in particular the notion of justness and the sources of the difficulties in reaching them wicksell s and lindahl s ideal states as well as the obstacles that they perceive are compared to more recent views on free riding and on the behavior of elected representatives their views on political bargaining are then related to later concepts in particular to the core of the economy

revealed social preferences of dutch political parties we measure the redistributive preferences of dutch political parties using unique detailed information from their election proposals by employing the inverse optimal tax method we calculate the political weights across the income distribution for each political party we find that all dutch political parties give a higher political weight to middle incomes than to the poor moreover the political weights of the rich are close to zero furthermore we detect a strong political status quo bias as the political weights of all political parties hardly deviate from the weights implied by the pre existing tax system we argue that political economy considerations are key in understanding these results

a solution concept for majority rule in dynamic settings we define and explore the notion of a dynamic condorcet winner dcw which extends the notion of a condorcet winner to dynamic settings we show that for every dcw every member of a large class of dynamic majoritarian games has an equivalent equilibrium and that other equilibria are not similarly portable across this class of games existence of dcws is guaranteed when members of the community are sufficiently patient we characterize sustainable and unsustainable outcomes study the effects of changes in the discount factor investigate efficiency properties and explore the potential for achieving renegotiation proof outcomes we apply this solution concept to a standard one dimensional choice problem wherein agents have single peaked preferences as well as to one involving the division of a fixed aggregate payoff

fairness self interest and the politics of the progressive income tax all advanced democracies have adopted income taxes with considerable progression in marginal tax rates to explain this we examine the nature of individual and collective preferences over alternative tax schedules in the context of a simple two sector model we first consider the case of altruistic or sociotropic citizens who view the income tax as a means of achieving a fairer or more egalitarian distribution of income we show that greater marginal rate progressivity may well be less fair that a fairest tax however defined is always a linear or flat rate schedule in which all incomes are taxed at the same marginal rate and that with a purely sociotropic electorate there exists a flat rate schedule which is a majority equilibrium we then show that with self interested voters who seek to minimize their own tax burdens greater marginal rate progression may well be preferred by middle and upper income voters that for middle income citizens the optimal schedule is a sharply progressive one and that within the set of individually optimal schedules there exists a majority equilibrium which is a progressive schedule which minimizes the burden on median income or middle class citizens at the expense of lower and upper income taxpayers

toilet cleaning and department chairing volunteering a public service abstract who will do a job that nobody wants but that someone has to do the search for a volunteer is modelled as a war of attrition in which everyone is tempted to just wait for someone else to do it we show that the volunteer will be ceteris paribus the individual for whom the benefit cost ratio of performing the public service is largest the one most impatient to consume it or the one who stands to benefit from it the longest

representative democracy and marginal rate progressive income taxation abstract this paper develops a political economy model that is consistent with the fact that democracies have a preference for increasing marginal tax rates on income we present a model in which there is an exogenous set of political parties with preferences over the set of admissible tax schedules this set contains virtually any increasing and piecewise linear continuous function each party decides whether or not to present a candidate for election there is a fixed cost of running the elected candidate implements one of her preferred tax policies our main results provide conditions under which a strong nash equilibrium exists and a tax schedule with increasing marginal tax rates is implemented in some nash equilibria and in any strong nash equilibrium

is there a demand for income tax progressivity recently marhuenda and ortuno ortin economics letters 48 1995 319 have provided a popular support for progressivity theorem that says that a marginal progressive tax always defeats a marginal regressive tax as long as individuals vote for the tax scheme minimizing their tax liabilities and the median income is less than the mean income in this paper we provide under similar circumstances a popular support for regressivity theorem according to which for any existing tax scheme there is always a majority support for a regressive reform reducing marginal progressivity or increasing marginal regressivity this regressive reform is supported by both extremes of the income distribution combining this result with marhuenda and ortuno ortin s result implies that vote cycling between regressive and progressive tax reform is inevitable and thus that the demand for progressivity cannot be established in the standard downsian framework with self interested voters

an economic model of representative democracy this paper develops an approach to the study of democratic policy making where politicians are selected by the people from those citizens who present themselves as candidates for public office the approach has a number of attractive features first it is a conceptualization of a pure form of representative democracy in which government is by as well as of the people second the model is analytically tractable being able to handle multidimensional issue and policy spaces very naturally third it provides a vehicle for answering normative questions about the performance of representative democracy

factions and political competition this paper presents a new model of political competition in which candidates belong to factions before elections factions compete to direct local public goods to their local constituencies the model of factional competition delivers a rich set of implications relating the internal organization of the party to the allocation of resources in doing so the model provides a unified explanation of two prominent features of public resource allocations the persistence of possibly inefficient policies and the tendency of public spending to favor incumbent party strongholds over swing constituencies

fractionalization and the size of government i study the effect of voters with a group based social conscience voters care more about the well being of those belonging to their own group than the rest of the population within a model of political tax determination both fractionalization and group antagonism reduce the support for redistribution whereas within group inequality increases support for redistribution inequality between groups has the opposite effect these results hold even if a poor group forms a majority using a panel constructed from us micro data i find support for the hypothesis that within race inequality increases redistribution while between race inequality decreases redistribution

social norms moderate the effect of tax system on tax evasion evidence from a large scale survey experiment in this study we reconcile conflicting findings from the extant literature on the impact of tax system parameters on tax noncompliance we argue that social norms play a role of heuristics facilitating tax payers response to the instrumental incentives posed by the systemic parameters such as tax rate and penalties for evasion and thus moderate the effect of those parameters on willingness to evade taxes relying on a unique survey experiment conducted in fourteen countries of central eastern europe we demonstrate two types of a conditioning effect of norms first the impact of tax rates on respondents propensity for tax evasion is moderated by the perceived norms of the society at large descriptive norms in particular an increasing tax rate lowers the probability of evasion as long as one views most others as honest taxpayers which highlights the importance of equitability fairness concerns for tax compliance decisions in contrast the impact of punishment is moderated by the perceived norms of one s immediate reference group subjective norms strong subjective compliance norms tend to effectively replace penalties as a mechanism discouraging tax evasion suggesting that the deterrent effect of a penalty can be entirely suppressed when subjective norms are strong these findings have important implications for the understanding of tax compliance decisions under different formal and informal regimes

the war of attrition in continuous time with complete information this paper provides a complete characterization of the nash equilibrium outcomes for the war of attrition when time is continuous and information is complete it allows for asymmetric payoffs and an arbitrary time horizon in addition to certain asymme tric pure strategy equilibria that always exist the authors establi sh the conditions under which there is also a continuum of mixed strategy equilibria these are most likely to exist when either the horizon is infinite or the game is symmetric copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

endogenous credible commitment and party competition over redistribution under alternative electoral institutions political parties competing in elections for the power to set public policy face the problem of making credible their policy promises to voters i argue that this commitment problem crucially shapes party competition over redistribution the model i develop shows that under majoritarian electoral rules parties efforts to achieve endogenous commitment to policies preferred by the middle class lead to different behavior and outcomes than suggested by existing theories which either assume commitment or rule out endogenous commitment thus left parties can have incentives to respond to rising income inequality by moving to the right in majoritarian systems but not under proportional representation the model also generates new insights about the anti left electoral bias often attributed to majoritarian electoral rules and the strategic use of parliamentary candidates as a commitment device i find evidence for key implications of this logic using panel data on party positions in 16 parliamentary democracies

voting over income taxation abstract a major problem of the positive theory of income taxation is to explain why statutory income tax schedules in practice are marginal rate progressive while it is commonly believed that this is but a simple consequence of the fact that the number of relatively poor voters exceeds that of richer voters in general putting this contention in a voting equilibrium context is not a trivial task we do this here in the context of nonlinear taxation and attempt to provide a formal argument in support of this heuristic claim we first establish the existence of mixed strategy equilibria and identify certain cases in which marginal rate progressive taxes are chosen almost surely by the political parties unfortunately we also find that if the tax policy space is not artificially constrained the support of at least one equilibrium cannot be contained within the set of marginal rate progressive taxes

estimating tax noncompliance with evidence from unaudited tax returns this article estimates the degree of tax noncompliance using evidence from unaudited tax returns measurements of noncompliance are derived from the relationship between reported charitable contributions and reported income from wages and salary as compared to alternative reported income sources such as self employment farm and other small business income assuming that the source of one s income is unrelated to one s charitable inclinations and that the ratio of true income to taxable income does not vary by income source any difference in the relationship between charitable contributions and the source of income can be attributed to relative underreporting by the individual we find that the implied amount of noncompliance is significant and that it varies by source of income as well as between positive and negative values of each type of income tax evasion creates horizontal inequity and if opportunities for evasion are correlated with income complicates the attempt to achieve vertical equity evasion also imposes economic costs because taxpayers expend resources to facilitate evasion and the tax agency expends resources to contain it the equity and efficiency implications of tax evasion and optimal policy to address it depend on its magnitude and nature which for obvious reasons is difficult to ascertain this article contributes to that effort by developing a new method for estimating the extent and nature of tax noncompliance based on evidence from unaudited tax returns this evidence is derived from the relationship between reported charitable contributions and reported taxable income from various sources such as wages and salaries selfemployment nonfarm small business and farm income and is based on the assumptions that the source of one s income is unrelated to one s charitable inclinations and that the ratio of true income to taxable income does not vary by income source we find that the implied amount of noncompliance on non wageand salary income is substantial and that it varies among these sources of income as well as between positive and negative values of each type of income on average reported positive self employment nonfarm small business and farm income must be multiplied by a factor of 1 54 4 54 and 3 87 respectively in order to obtain true income even those individuals who report zero income for a specific income source but file the schedule for that source are estimated to have true positive income finally those households that report negative schedule income may actually have greater true income than those households that report positive income

primaries the unifying force we present a formal model of intra party politics to explain candidate selection within political parties we think of parties as heterogeneous groups of individuals who aim to implement a set of policies but who differ in their priorities when party heterogeneity is too great parties are in danger of splitting into smaller yet more homogeneous political groups in this context we argue that primaries can have a unifying role if the party elite cannot commit to policy concessions our model shows how three factors interact to create incentives for the adoption of primary elections namely 1 the alignment in the preferred policies of various factions within a party 2 the relative weight of each of these factions and 3 the electoral system we discuss the existing empirical literature and demonstrate how existing studies can be improved in light of our theoretical predictions to provide a new structured perspective on the adoption of primary elections

the determinants of capital gains tax compliance evidence from the rjr nabisco leveraged buyout abstract inability to observe both actual and reported capital gains has impeded studies of capital gains tax compliance this study overcomes such limitations through access to both confidential tax returns and internal shareholder records tests are conducted at the individual taxpayer level for associations between compliance rates for capital gains taxes generated by rjr nabisco shareholders during its leveraged buyout and income marginal tax rates socioeconomic characteristics and measures of the taxpayer s perception of the noncompliance penalty we find noncompliance decreasing in taxable income including rjr nabisco capital gains first dollar marginal tax rates self employment income rental income and other interest paid

parental responses to child support obligations evidence from administrative data abstract we study parental responses to child support obligations using rich administrative data from denmark and variation in the child support formula we estimate that a 1000 dkk 160 increase in a father s obligation is associated with a 273 dkk 45 increase in his payment a higher obligation reduces father child co residence pointing to substitution between financial and non pecuniary investments further obligations increase post separation fertility among remarried fathers but have no impacts on maternal fertility or either parent s labor supply our findings suggest that government efforts to increase child investments through mandates on parents can be complicated by their behavioral responses to them

redistributing income under proportional representation although majoritarian decision rules are the norm in legislatures relatively few democracies use simple majority rule at the electoral stage adopting instead some form of multiparty proportional representation moreover aggregate data suggest that average income tax rates are higher and distributions of posttax income flatter in countries with proportional representation than in those with majority rule while there are other differences between these countries this paper explores how variations in the political system per se influence equilibrium redistributive tax rates and income distributions a three party proportional representation model is developed in which taxes are determined through legislative bargaining among successful electoral parties and the economic decision for individuals is occupational choice political economic equilibria for this model and for a two party winner take all majoritarian system are derived and compared

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

knowledge is power a theory of information income and welfare spending no voters cast their votes based on perfect information but better educated and richer voters are on average better informed than others we develop a model where the voting mistakes resulting from low political knowledge reduce the weight of poor voters and cause parties to choose political platforms that are better aligned with the preferences of rich voters in us election survey data we find that income is more important in affecting voting behavior for more informed voters than for less informed voters as predicted by the model further in a panel of us states we fi nd that when there is a strong correlation between income and political information congress representatives vote more conservatively which is also in line with our theory

on the internal revenue service s service and enforcement i introduction the internal revenue service irs services as well as audits taxpayers the irs provides taxpayer service through a variety of channels including its website toll free telephone lines and the taxpayer assistance center for fy 2008 the irs budget request includes 3 6 billion for taxpayer service and 7 2 billion for enforcement everson 2007 in the assessment of the fy 2009 irs budget request the government accountability office gao 2008 1 points out that effective tax administration requires a balance of service and enforcement and enforcement efforts should be combined with taxpayer service because both affect compliance although taxpayer service is an important activity of the irs s operation to our knowledge there is no formal model to address the connection between service and enforcement and more importantly its policy implications in the context of tax compliance this article seeks to take a step to fill this void we consider a simple tax compliance model which is built upon the seminal work of graetz reinganum and wilde 1986 hereafter grw unlike the classical contribution of allingham and sandmo 1972 and yitzhaki 1974 which treats the irs actions as exogenous in their analysis of tax evasion the grw model views the irs as a strategic player that interacts with taxpayers the grw model also differs from the principal agent tax evasion model first introduced by reinganum and wilde 1985 as pointed out by grw the principal agent model suffers from the time inconsistency problem as it requires that the irs announce and commit to an audit policy even though the precommitted audit policy will typically prove suboptimal once taxpayers submit their reported income grw emphasize that their interactive model follows the natural temporal sequence of decisions first taxpayers report their income and only then does the irs decide whether to perform tax audits this sequence is what we typically observe in the real world 1 however like other models on tax compliance grw consider the enforcement part but leave out the service part of the irs activities we extend the grw model to the real world in which the irs services as well as audits taxpayers similar to grw we assume that a taxpayer has either high income or low income to incorporate the role of the irs s service we also assume that taxpayers are uncertain about whether their incomes are eligible for deduction exemption and may seek advice from the taxpayer service provided by the irs to mitigate the uncertainty an important feature of our model is that in equilibrium all net tax revenues collected by the irs are from those taxpayers who voluntarily report high incomes to the irs to maximize the population of the taxpayers in this group the irs will not provide the most accurate service but only maintain an intermediate level of quality the optimal level of accuracy will be increasing as the difficulty in identifying the true income eligibility increases which may be due to more complicated tax laws moreover there exists a conflict between the irs and the society with regard to the optimal taxpayer service in that the society s preferred quality of taxpayer service is likely to be sufficiently high the conflict tends to be intensified as the cost of tax audits becomes lower our result is consistent with the trend in the united states regarding the resources allocated to the taxpayer service in the past few decades we also extend our model in the following two directions the first extension is to address the issue of corruption in tax administration many developing countries suffer from inefficiencies in tax administration and corruption arising from enforcement some authors argue that it is important for developing countries to recognize the service paradigm of tax compliance which emphasizes not only the role of enforcement but also the role of taxpayer service

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

less fighting than expected experiments with wars of attrition and all pay auctions while all pay auctions are well researched experimentally we do not have much laboratory evidence on wars of attrition this paper tries to fill this gap technically there are only a few differences between wars of attrition and all pay auctions behaviorally however we find striking differences as many studies our experiment finds overbidding in all pay auctions in contrast in wars of attrition we observe systematic underbidding

income tax evasion an intersectoral analysis abstract this paper develops an intersectoral model of income tax evasion with general equilibrium effects key elements of the model are imperfectly substitutable outputs from the compliant and evading sectors and workers with heterogeneous evasion costs the model allows for biased public expenditures a wide range of behavioural responses and both legitimate and criminal activities evading tax as well as tax avoidance activities qualitative and quantitative assessments are undertaken for the effects of tax rate changes on evasion activity relative output prices and real tax revenues this approach offers useful findings for taxation policy and is amenable to further analytical extensions

understanding preferences for income redistribution abstract recent research suggests that income redistribution preferences vary across identity groups we employ statistical learning methods that emphasize pattern recognition classification and regression trees cart and random forests randomforests to uncover what these groups are using data from the general social survey we find that out of a large set of identity markers only race gender age and socioeconomic class are important classifiers for income redistribution preferences further the uncovered identity groupings are characterized by complex patterns of interaction amongst these salient classifiers we explore the extent to which existing theories of income redistribution can explain our results but conclude that current approaches do not fully explain the findings

the econometrics of piecewise linear budget constraints a survey and exposition of the maximum likelihood method in this article maximum likelihood techniques for estimating consumer demand functions when budget constraints are piecewise linear are exposited and surveyed consumer demand functions are formally derived under such constraints and it is shown that the functions are themselves nonlinear as a result the econometric problems in estimating such functions are exposited and the importance of the stochastic specification is stressed in particular the specification of both unobserved heterogeneity of preferences and measurement error econometric issues in estimation and testing are discussed and the results of the studies that have been conducted to date are surveyed

back rooms or ballot boxes candidate nomination in argentina how political parties select their candidates for public office profoundly affects the types of people who are elected as well as how these people behave in office this selection process also provides important insights on how parties function internally and on where political power is located within a country only a few comparative studies of nomination procedures exist and none explain why some parties at some points in time select candidates via direct primaries and others do not the authors analyze an original data set of 610 district level nomination processes for the biennial argentine chamber of deputies elections held between 1983 and 2001 they conclude that several specific institutional and partisan features have a prominent effect on the probability that a political party will choose its candidates at the ballot box direct primary rather than in a smoke filled back room elite arrangement

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

volunteering a public service an experimental investigation in some public goods environments it may be advantageous for heterogeneous groups to be coordinated by a single individual this volunteer will bear private costs for acting as the leader while enabling each member of the group to achieve maximum potential gains this environment is modeled as a war of attrition game in which everyone can wait for someone else to volunteer since these games generally have multiple nash equilibria but a unique subgameperfect equilibrium we tested experimentally the predictive power of the subgame perfection criterion our data contradict that subjects saw the subgame perfect strategy combination as the obvious way to play the game an alternative behavioral hypothesis that subjects were unable to predict accurately how their opponents would play and tried to maximize their expected payoff is proposed this hypothesis fits the observed data generally well

why the poor do not expropriate the rich an old argument in new garb we consider a political economy with two partisan parties each party represents a given constituency of voters if one party labour represents poor voters and the other christian democrats rich voters if a redistributive tax policy is the only issue and if there are no incentive considerations then in equilibrium the party representing the poor will propose a tax rate of unity if however there are two issues tax policy and religion for instance then this is not generally the case the analysis shows that if a simple condition on the distribution of voter preferences holds then as the salience of the non economic issue increases the tax rate proposed by labour in equilibrium will fall possibly even to zero even though a majority of the population may have an ideal tax rate of unity 1998 elsevier science s a all rights reserved

the politics of progressive income taxation with incentive effects this paper studies majority voting over quadratic taxation and investigates under which conditions marginal progressivity emerges as a voting outcome in our model with endogenous income there is no majority condorcet winning tax schedule we then investigate less demanding political equilibrium concepts in order to see under which conditions the set of equilibria is composed only of progressive tax functions we follow three strategies i reduction of the policy space to the tax functions that are ideal for some voter ii elimination of weakly dominated strategies and the use of mixed strategies in a standard downsian two party competition game iii assumption that political parties interact repeatedly and care about the size of their majority although each approach captures a different aspect of political behavior they point to the same simulation based conclusion that progressivity is more likely to emerge for most distributions of abilities and that it is actually the only possible voting outcome if the distribution is sufficiently concentrated at the middle

socially optimal districting a theoretical and empirical exploration this paper investigates the problem of optimal districting in the context of a simple model of legislative elections in the model districting matters because it determines the seat vote curve which describes the relationship between seats and votes the paperrst characterizes the optimal seat vote curve and shows that under a weak condition there exist districtings that generate this ideal relationship the paper then develops an empirical methodology for computing seat vote curves and measuring the welfare gains from implementing optimal districting this is applied to analyze the districting plans used to elect u s state legislators during the 1990s

why are gender quota laws adopted by men the role of inter and intraparty competition in nearly every case of quota law adoption the support of party elites is critical but this raises a puzzle what can motivate predominantly male elites to put these policies in place this artic

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

income tax compliance and evasion a graphical approach individual income tax compliance has been one of the most significant applications of becker s 6 economic approach to criminal activity and punishment this paper considers an approach to optimal audit policies that relies on the distribution of risk aversion among taxpayers and is consistent with some stylized facts about the u s tax system rather than considering the tax evasion situation as a game between the tax collector and identical taxpayers this model has the tax collector choose an audit probability to maximize expected tax revenues net of audit costs knowing that each taxpayer has a reservation audit probability the smallest audit probability that would evoke truthful reporting depending on how averse to risk she is as the heterogeneity in the population vanishes this problem becomes the same as the tax compliance problem analyzed in graetz reinganum and wilde 9 this paper extends earlier contributions by analyzing income tax evasion and compliance with a population that is heterogeneous with respect to risk aversion how other parameters of the problem influence optimal audit probabilities as well as the equilibrium proportion of tax evaders will be explored the diversity in preferences over lotteries leads to some interesting comparative static results for example the impact of an increase in the penalty for lying is ambiguous in this model the graphical approach taken here allows us to identify the relevant factors and how they interact additionally this analysis makes it clear why the distribution of risk aversion in the population affects the equilibrium audit probability but not the proportion of tax evaders this problem has been approached in several different ways 1 for example clotfelter 7 slemrod 15 aim and beck 2 and witte and woodbury 16 have studied this phenomenon econometrically but the dearth of reliable data has made empirical analysis difficult other economists most noteworthy alm mcclelland and schulze 5 and alm jackson and mckee 4 have taken a different tack employing the methods of experimental economics while these seminal studies have shed substantial light on taxpayer behavior a leap of faith is required to extrapolate from the laboratory to actual tax compliance decisions the theoretical tax compliance literature originally focused on the behavior of the taxpayer as in allingham and sandmo 1 that is individuals were modeled as expected utility maximizers with exogenously given audit probabilities more recent contributions to the theoretical literature reinganum and wilde 12 13 and graetz reinganum and wilde 9 for example have

indifference or indecisiveness choice theoretic foundations of incomplete preferences abstract a commonly held belief in economics is that an individual s preferences that are revealed by her choices must be complete this paper takes issue with this position by showing that one may be able to distinguish between indifference and indecisiveness of an agent upon observing her choice behavior we relax the standard weak axiom of revealed preferences warp and show that a potent theory of individual choice with and without risk can be founded on this weaker axiom when it is coupled with some other standard postulates the most notable features here are that an agent is allowed to be indifferent between certain alternatives and indecisive about others moreover an outside observer can identify which of these actually occur upon examining the observable choice behavior of the decision maker as an application we also show how our theory may be able to cope with the classical preference reversal phenomenon

an empirical test for tax evasion this paper develops a methodology that uses microeconomic data from individual tax returns to test for the presence of tax evasion the test is then applied to a large sample of taxpayers drawn from the u s treasury tax file for 1977 the frequency of evasion indicated by the test is significantly greater than zero and within the wide range that other evidence suggests is the extent of evasion the associations between evasion and characteristics of the taxpayer such as marginal tax rate income age and marital status are also investigated and compared to the findings of earlier studies

signaling character in electoral competition we study a one dimensional hotelling downs model of electoral competition with the following innovation a fraction of candidates have character and are exogenously committed to a campaign platform this is unobservable to voters character is desirable and a voter s utility is a convex combination of standard policy preferences and her assessment of a candidate s character this structure induces a signaling game between strategic candidates and voters since a policy platform affects voters utilities not only directly but also indirectly through inferences about a candidate s character the model generates a number of predictions starting with a failure of the median voter theorem jel d72 d82

on the political and fiscal determinants of income redistribution under federalism and democracy evidence from germany several recent studies suggest that transfers from central to regional governments are motivated by political considerations in this paper we examine if this is also the case for transfers from regional to central governments in the context of the german fiscal equalization system we examine the factors that contribute to differences in tax revenues across german states the evidence indicates that both fiscal incentives and political factors can explain these differences although in germany the former are more important moreover accounting for fiscal institutions has important consequences for the empirical assessment of political influences on taxation overall we find that the political affiliation of the state governor is an important factor in explaining differences in state tax revenues thus the right wing party cdu csu is effective in relaxing the tax burden at the state level in contrast partisan alignment between the state government and the federal government loses its importance once fiscal conditions enter the empirical model

the primary effect preference votes and political promotions we analyze how electoral rules and outcomes shape the internal organization of political parties theoretically we make an analogy with primary elections to argue that parties use preference vote tallies to identify popular politicians and promote them to positions of power empirically we document this behavior among parties in sweden s semi open list system and in brazil s open list system to identify a causal impact of preference votes we exploit a regression discontinuity design around the threshold of winning the most preference votes on a party list in our main case sweden these narrow primary winners are at least 50 more likely to become local party leaders than their runners up across individual politicians the primary effect is present only for politicians who hold the first few positions on the list and when the preference vote winner and runner up have similar competence levels across party groups the primary effect is the strongest in unthreatened governing parties

mixed oligopoly equilibria when firms objectives are endogenous abstract we study a vertically differentiated market where two firms simultaneously choose the quality and price of the good they sell and where consumers may also care for the average quality of the goods supplied firms are composed of two factions whose objectives differ one is maximizing profit while the other maximizes revenues the equilibrium concept we model called firm unanimity nash equilibrium fune corresponds to the nash equilibrium between firms when there is efficient bargaining between the two factions inside both firms we first show that such equilibria are inefficient with both firms underproviding quality we then assume that the government takes a participation in one firm which introduces a third faction bent on welfare maximization in that firm we study the characteristics of equilibria as a function of the bargaining weight of the welfare maximizing faction we show that equilibrium welfare increases with this bargaining weight especially if consumers care a lot for the average quality of the goods provided

partisan impacts on the economy evidence from prediction markets and close elections analyses of the effects of election outcomes on the economy have been hampered by the problem that economic outcomes also influence elections we sidestep these problems by analyzing movements in economic indicators caused by clearly exogenous changes in expectations about the likely winner during election day analyzing high frequency financial fluctuations following the release of flawed exit poll data on election day 2004 and then during the vote count we find that markets anticipated higher equity prices interest rates and oil prices and a stronger dollar under a george w bush presidency than under john kerry a similar republican democrat differential was also observed for the 2000 bush gore contest prediction market based analyses of all presidential elections since 1880 also reveal a similar pattern of partisan impacts suggesting that electing a republican president raises equity valuations by 2 3 percent and that since ronald reagan republican presidents have tended to raise bond yields

efficiency welfare and political competition we study political competition in an environment in which voters have private information about their preferences our framework covers models of income taxation public goods provision or publicly provided private goods politicians are vote share maximizers they can propose any policy that is resource feasible and incentive compatible they can also offer special favors to subsets of the electorate we prove two main results first the unique symmetric equilibrium is such that policies are surplus maximizing and hence first best pareto efficient second there is a surplus maximizing policy that wins a majority against any welfare maximizing policy thus in our model policies that trade off equity and efficiency considerations are politically infeasible jel codes c72 d72 d82 h21 h41 h42

electoral bias and policy choice theory and evidence this paper develops an approach to studying how bias in favor of one party due to the pattern of electoral districting affects policy choice we tie a commonly used measure of electoral bias to the theory of party competition and show how this affects party strategy in theory the usefulness of the approach is illustrated using data on local government in england the results suggest that reducing electoral bias leads parties to moderate their policies

parties as political intermediaries this paper argues that parties regulate competition among like minded factions so as to enhance reputation building by and voter trust in the politicians standing for a given cause while intra and interparty competition contributes to keeping politicians on their toes unbridled competition may encourage politicians to challenge good platforms and to wage competition along socially suboptimal dimensions for example by privileging form over content the paper builds a simple model of intraparty competition and studies whether various hierarchical or democratic party institutions constitute an efe cient form of party governance the paper shows that intraparty disagreements when they occur hurt the party s position in the general election but that their possibility enhances party image and that parties must be able to avoid behind the scene allocations of portfolios and spoils in order to be credible last it analyzes the impact of political polarization and interparty competition on the choice of party governance

diversity and redistribution abstract in this paper we analyze the interaction of income and preference heterogeneity in a political economy framework we ask whether the presence of preference heterogeneity arising for example from different ethnic groups or geographic locations affects the ability of the poor to extract resources from the rich we study the equilibrium of a game in which coalitions of individuals form parties parties propose platforms and all individuals vote with the winning policy chosen by plurality political parties are restricted to offering platforms that are credible in that they belong to the pareto set of their members the platforms specify the values of two policy tools a general redistributive tax which is lump sum rebated or used to fund a general public good and a series of taxes whose revenue is used to fund specific targeted goods tailored to particular preferences or localities our analysis demonstrates that taste conflict first dilutes but later reinforces class interests when the degree of taste diversity is low the equilibrium policy is characterized by some amount of general income redistribution and some targeted transfers as taste diversity increases in society the set of equilibrium policies becomes more and more tilted towards special interest groups and against general redistribution as diversity increases further however the only policy that can emerge supports exclusively general redistribution

political competition and mirrleesian income taxation a first pass we study downsian competition in a mirrleesian model of income taxation the competing politicians may dier in competence if politicians engage in vote share maximization the less competent politician s policy proposals are attractive to the minority of rich agents whereas those of the competent politician are attractive to the majority of poor agents the less competent politician wins with positive probability which gives rise to a political failure in the sense of besley and coate 1998 political failures are avoided if politicians maximize winning probabilities nevertheless the two equilibria cannot be pareto ranked the minority may be better o under vote share maximization

do voters affect or elect policies evidence from the u s house there are two fundamentally different views of the role of elections in policy formation in one view voters can affect candidates policy choices competition for votes induces politicians to move toward the center in this view elections have the effect of bringing about some degree of policy compromise in the alternative view voters merely elect policies politicians cannot make credible promises to moderate their policies and elections are merely a means to decide which one of two opposing policy views will be implemented we assess which of these contrasting perspectives is more empirically relevant for the u s house focusing on elections decided by a narrow margin allows us to generate quasi experimental estimates of the impact of a randomized change in electoral strength on subsequent representatives roll call voting records we find that voters merely elect policies the degree of electoral strength has no effect on a legislator s voting behavior for example a large exogenous increase in electoral strength for the democratic party in a district does not result in shifting both parties nominees to the left politicians inability to credibly commit to a compromise appears to dominate any competition induced convergence in policy

a model of political competition with citizen candidates the authors develop a model of electoral competition in which citizens choose whether or not to run as candidates a winner implements her favorite policy the equilibrium number of candidates depends negatively on the cost of running and positively on the benefits of winning for some parameter values all equilibria under plurality rule have exactly two candidates whose positions are distinct two candidate elections are more likely under plurality rule than under a runoff system the candidates positions are less differentiated under a runoff system there exist equilibria under both systems in which some candidates have no chance of winning

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

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