corruption and government size a disaggregated analysis using annual state level data over 1983 1987 this paper examines the effect of government size on corruption by public officials by including both demand and supply side incentives for engaging in corrupt practices our objectives are twofold first we assess the relationship between the incidence of corruption and overall measures of the size of the federal government and the state local sector in each state second we explore what kinds of government activities are more likely to be successful in deterring abuse of public office our results are generally supportive of becker s crime and punishment model regarding the primary focus of the paper our results show that government size in particular spending by state governments does indeed have a strong positive influence on corruption

the effect of taxes on labor supply in the underground economy this paper uses micro data from a randomized survey carried out in the metropolitan area of quebec city canada to analyze the decision to evade taxes and work in the underground economy the results indicate that taxes distort labor market activities away from the regular sector to the underground sector but the distortion is small for the average worker the distortion is large however for particular groups of the population such as welfare claimants copyright 1994 by american economic association

optimal farm size in an uncertain land market the case of kyrgyz republic this article applies a real options model to the problem of land development making use of the 1998 2001 kyrgyz household budget survey we show that when the hypothesis of decreasing return to scale holds the relation between the threshold value of revenue per hectare and the amount of land cultivated is positive in addition the relation between the threshold and the amount of land owned is positive in the case of continuous supply of land and negative when there is discontinuous supply of land the direct consequence is that in the first case smaller farms will be more willing to rent land and exercise the option where in the second case larger farms will exercise first the results suggest three main conclusions i the combination of uncertainty and irreversibility is an important factor in land development decisions ii farmer behavior is consistent with the continuous profit maximization model and iii farming unit revenue tends to be positively related to farm size once uncertainty is properly accounted for

applications of behavioural economics to tax evasion the paper reviews recent models that have applied the techniques of behavioural economics to the analysis of the tax compliance choice of an individual taxpayer the construction of these models is motivated by the failure of the yitzhaki version of the allingham sandmo model to predict correctly the proportion of taxpayers who will evade and the effect of an increase in the tax rate upon the chosen level of evasion recent approaches have applied non expected utility theory to the compliance decision and have addressed social interaction the models we describe are able to match the observed extent of evasion and correctly predict the tax effect but do not have the parsimony or precision of the yitzhaki model

how does land fragmentation affect off farm labor supply panel data evidence from china abstract this article provides a deeper theoretical understanding of the linkages between land fragmentation and off farm labor supply in china andinvestigates this relationship empirically in a more direct way than does the existing literature drawing upon a rural household panel data setcollected in zhejiang hubei and yunnan provinces from 1995 to 2002 we estimate the effects in two steps first we estimate the effect of landfragmentation on labor productivity second we estimate the effect of land fragmentation on off farm labor supply the production function resultsshow that land fragmentation indeed leads to lower agricultural labor productivity implying that land consolidation will make on farm work moreattractive and thus decrease off farm labor supply however the effect of land consolidation on off farm labor supply is not signi cant one likelyexplanation for this result may be the potentially imperfect labor markets jel classi cations j22 q15 q24 r23 keywords

custom hired tractor services and returns to scale in smallholder agriculture a production function approach historically agricultural transformation has often accompanied the increase in the returns to scale little direct evidence exists however on what actually causes such increase despite the knowledge of many factors that are associated with this increase we fill this knowledge gap by testing whether hiring in tractor services has raised returns to scale in agriculture at the household level in nepal terai that has undergone rapid growth in the tractor use through custom hiring services using switching regression and inverse probability weighted generalized method of moments we address two sources of endogeneity involved with the estimation of returns to scale 1 farmers self selection on whether to hire in tractor services and 2 use of inputs in the production function for both cobb douglas and translog production function specifications we find that hiring in tractor services significantly increased the returns to scale in agricultural production by about 0 2 0 3 among farm households not owning tractors for which suitable control groups are found findings are robust under various alternative specifications

corruption trade costs and gains from tariff liberalization evidence from southern africa this paper exploits quasi experimental variation in tariffs in southern africa to estimate trade elasticities traded quantities respond only weakly to a 30 percent reduction in the average nominal tariff rate trade flow data combined with primary data on firm behavior and bribe payments suggest that corruption is a potential explanation for the observed low elasticities in contexts of pervasive corruption even small bribes can significantly reduce tariffs making tariff liberalization schemes less likely to affect the extensive and the intensive margins of firms import behavior the tariff liberalization scheme is however still associated with improved incentives to accurately report quantities of imported goods and with a significant reduction in bribe transfers from importers to public officials

spatial structure of agricultural production in china the spatial structure of county level agricultural production in china in 1999 is analysed a convenient simple method that corrects for both spatial autocorrelation and spatial heterogeneity in the input output relationships using spatial lag models and an allowance for the response coefficients to vary across relatively homogeneous regions are described empirical results suggest an abundant labour supply and extensive use of agricultural machinery reflected in its declining price although mechanization is relatively new machines have replaced fertilizer in agricultural production in the north northeast northwest and east regions while irrigation and fertilizer are the significantly important inputs in the central and southwest regions

optimal taxation in the presence of tax evasion expected utility versus prospect theory abstract it is now well known that the predictions of expected utility theory eut applied to tax evasion are quantitatively and qualitatively at variance with the evidence while prospect theory pt makes the correct predictions in this literature the tax rate is exogenous we endogenize the tax rate and require that a successful theory should explain jointly the facts on the tax rate tax gap and the level of government expenditure we find that the data is best described by taxpayers using pt and the government using standard utility theory eut the results are robust to several possible alternative specifications we discuss how our results have a bearing on the debate between liberalism versus paternalism in behavioral economics we also propose an alternative explanation based on the notion of context dependent preferences

an econometric analysis of income tax evasion and its detection this article presents an econometric analysis of income tax evasion and its detection based on individual level data drawn from the internal revenue service 1982 and 1985 taxpayer compliance measurement programs i specify a model consisting of two equations the first measures the extent of evasion the second the fraction of evasion detected the empirical analysis explores the effects of income the marginal tax rate and various socioeconomic characteristics on filer evasion behavior and it assesses the variability in detection rates among irs examiners finally i use the empirical estimates to construct new estimates of the income tax gap the new estimates are very close to the previous irs estimates

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

approaches for estimating noncompliance examples from federal taxation in the united states crime and underground economic activity are a fact of life around the world most societies attempt to control these activities through the expenditure of resources on monitoring prosecution punishment and educational programmes gathering statistics about who is engaging in illegal or underground activity the frequencies with which various crimes or underground transactions are occurring and the severity or magnitude of these acts is crucial for making good decisions regarding our allocation of resources in this area unfortunately in general it is very difficult to obtain accurate information about these issues this is partly because the individuals engaged in such activities wish not to be identified and often take actions to avoid detection and partly because by their very nature the activities tend not to generate economic accounting legal demographic or other cultural records the fact that it is difficult to obtain accurate information about the activities however does not in any way imply that we should not make a concerted effort to try to obtain the best information we can i believe the cost associated with attempting to determine the extent and nature of these activities is in most circumstances well below the expected benefit which includes the likelihood of improved decisionmaking by relevant government personnel and the general public as a result i also believe the debate about developing estimates of illegal or underground economic activity should primarily focus on practical issues related to how best to go about developing estimates that are as reliable as possible in this short article i shall discuss the measurement of noncompliance with laws and regulations my particular area of expertise and shall not discuss the measurement of other kinds of hidden economic behaviours such as informal contracting unmeasured home production and grey market activities in particular i shall discuss three approaches for estimating the aggregate amount of noncompliance with respect to a specific law or regulation i intensive data collection for a focused subsample of the population ii detection controlled estimation and iii the comparision of estimates generated by distinct datasets and models for each i shall describe in general terms what the approach is and how it is implemented review limitations of the approach and present an example of the application of the approach to the measurement of tax noncompliance in the united states my discussion shall necessarily be short and i refer the interested reader to a variety of original research publications for more details especially about the specific examples

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

myth and reality of flat tax reform micro estimates of tax evasion response and welfare effects in russia we examine the effects of russia s 2001 flat rate income tax reform on consumption income and tax evasion we use the gap between household expenditures and reported earnings as a proxy for tax e

local autonomy tax morale and the shadow economy policymakers often propose strict enforcement strategies to fight the shadow economy and to increase tax morale however there is an alternative bottom up approach that decentralises political power to those who are close to the problems this paper analyses the relationship with local autonomy we use data on tax morale at the individual level and macro data on the size of the shadow economy to analyse the relevance of local autonomy and compliance in switzerland the findings suggest that there is a positive negative relationship between local autonomy and tax morale size of the shadow economy

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

why do people pay taxes prospect theory versus expected utility theory abstract using actual probabilities of audit and penalty rates the return on evasion is 91 98 so why do not most of us evade existing analysis based on expected utility theory eut is unable to explain this furthermore and contrary to intuition and the bulk of evidence eut predicts that evasion should be decreasing in the tax rate yitzhaki puzzle we apply tversky and kahneman s tversky a kahneman d 1992 advances in prospect theory cumulative representation of uncertainty journal of risk and uncertainty 5 297 323 cumulative prospect theory to tax evasion we show that prospect theory provides a much more satisfactory account of tax evasion including an explanation of the yitzhaki puzzle this also provides independent confirmation of prospect theory

costs and benefits of land fragmentation evidence from rwanda this paper disentangles different aspects of land fragmentation and its impact on the efficiency of resource use the paper uses information on the incidence of crop shocks to assess whether fragmentation provides benefits in reducing risk and parcel coordinates and terrain adjusted travel times between parcels to more precisely account for the associated costs in 2010 11 data from rwanda while fragmentation increases the time required to move between a household s parcels this does not appear to affect overall technical efficiency on the farm fragmentation rather reduces the incidence of crop shocks and increases yields and productive efficiency in rwanda s setting interventions to reduce fragmentation may therefore be ineffective or counterproductive

differentiated products and evasion of import tariffs emerging literature has demonstrated some unique characteristics of trade in differentiated products this paper contributes to the literature by postulating that differentiated products may be subject to greater tariff evasion due to the difficulties associated with assessing their quality and price using product level data on trade between germany and 10 eastern european countries during 1992 2003 the authors find empirical support for this hypothesis they show that the trade gap defined as the discrepancy between the value of exports reported by germany and the value of imports from germany reported by the importing country is positively related to the level of tariff in 8 out of 10 countries further the authors show that the responsiveness of the trade gap to the tariff level is greater for differentiated products than for homogeneous goods a one percentage point increase in the tariff rate is associated with a 0 6 percent increase in the trade gap in the case of homogeneous products and a 2 1 percent increase in the case of differentiated products finally the data indicate that greater tariff evasion observed for differentiated products tends to take place through misrepresentation of the import prices

can corruption foster regulatory compliance the legal and economic literatures overwhelmingly support the notion that regulatory compliance is always less in the presence of corruption this paper departs from those literatures and shows that whenever public officials are paid fixed wages an increase in corruption may actually foster compliance the conditions that make this possible are laid down in a theoretical model empirical evidence that corroborates the theoretical findings is provided using firm level data for 26 transition economies

income splitting among the self employed under individual taxation with progressive marginal tax rates households in which the distribution of income is unequal benefit from attributing income to the lower income household member self employment provides greater potential to split income in this way because of the absence of a third party reporting income using the canadian experience as a case study this paper develops a unique estimator of the incidence of illegal income splitting among self employed couples the results suggest that the incidence of income splitting among self employed men in canada is non trivial but no evidence is found that self employed women attribute income to their spouses jel classification h26 h21 h31 j22 le fractionnement du revenu chez les travailleurs autonomes dans un regime fiscal qui a des taux marginaux d imposition progressive des revenus les membres d un menage dans lequel la repartition des revenus n est pas g rien n indique que les femmes qui sont travailleurs autonomes attribuent une portion de leurs revenus a leur epoux

tax evasion and self insurance abstract this paper examines the effect of an increase in the tax rates on tax evasion in a model where taxpayers self insure against possible penalties the analysis shows that the effect depends on the marginal productivity of self insurance if the marginal productivity is not too small an increase in the tax rates leads to greater tax evasion and less tax compliance this result stands in contrast with the theoretical result in the literature but accords well with empirical findings

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

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

a general characterization of optimal income tax enforcement this paper develops a general approach to characterizing optimal income tax and enforcement schemes our analysis clarifies the nature of the interplay between tax rates audit probabilities and penalties for misreporting in particular it is shown that for a variety of objective functions for the principal the optimal tax schedule is in general concave at least weakly and monotonic the marginal tax rates determine the audit probabilities and less harsh penalties lead to higher enforcement costs our results imply that there exists a tradeoff between equity and efficiency considerations in the enforcement context which is similar to that in the moral hazard context for tax policy it is well accepted by now that informational asymmetries generate important constraints on the formulation of economic policy an early and classic example is given by mirrlees 1971 who considers the problem of optimal income taxation when individuals differ in their ability to transform effort into income it is assumed that ability and effort of an individual cannot be observed at any cost whereas income which is the product of these two unobservables is perfectly and costlessly observable taxes can thus depend only on final income under these informational conditions the equity efficiency tradeoffs that constrain the choice of tax policy arise only because of the presence of moral hazard associated with taxation of income if there were no moral hazard i e individual efforts and therefore incomes were exogenous the problem of optimal income taxation would be a trivial one since by assumption individual incomes are perfectly and costlessly observable in much of the recent literature on optimal income taxation in the presence of costly enforcement reinganum and wilde 1985 border and sobel 1987 and others on the other hand individual incomes are treated as exogenous i e there is no moral hazard however informational constraints arise from another important consideration namely an individual s income cannot be directly observed it can only be verified through a costly

tax rates and tax evasion evidence from missing imports in china tax evasion by its very nature is difficult to observe we quantify the effects of tax rates on tax evasion by examining the relationship in china between the tariff schedule and the evasion gap which we define as the difference between hong kong s reported exports to china at the product level and china s reported imports from hong kong our results imply that a one percentage point increase in the tax rate is associated with a 3 percent increase in evasion furthermore the evasion gap is negatively correlated with tax rates on closely related products suggesting that evasion takes place partly through misclassification of imports from higher taxed categories to lower taxed ones in addition to underreporting the value of imports

tax progressivity income distribution and tax non compliance this article examines the determinants of tax non compliance when we recognise the existence of an imperfectly competitive tax advice industry supplying schemes which help taxpayers reduce their tax liability we apply a traditional industrial organisation framework to model the behaviour of this industry this tells us that an important factor determining the equilibrium price and hence the level of noncompliance is the convexity of the demand schedule we show that in this context this convexity is affected by the distribution of pre tax income the progressivity of the tax schedule and the way in which monitoring and penalties vary with income it is shown that lower pre tax income inequality as well as a less progressive tax code may cause more tax minimisation activities therefore the frequently advocated policy of reducing the highest tax rate may fail as a policy directed at improving tax discipline one way of offsetting the possible harm to tax compliance from a less progressive tax could be an adjustment of the penalty and monitoring functions

effects of tractor ownership on returns to scale in agriculture evidence from maize in ghana abstract agricultural transformation process around the world has often accompanied the rise in returns to scale rts while tractor ownership is often associated with greater rts in agriculture whether the tractor ownership actually causes such increase in rts has not been formally tested in the literature we bridge this knowledge gap using a unique survey data of tractor owning farm households in ghana we find that owning tractors significantly increases the rts in maize production on the households largest mono cropped plot and weakens inverse relationship between land productivity and farm size this is partly achieved through the rise in the rts in tillage production the amount of tillage conducted rather than the rts in maize production given a fixed amount of tillage produced these sets of evidence are obtained by addressing jointly the multiple sources of endogeneity of tractor ownership tractor values tillage production and other inputs used

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

economies of scale and mechanization in chinese corn and wheat production as the growth in chinese farm productivity slowed down between 2000 and 2010 modernizing agriculture has become a priority of the chinese government given the important role of mechanization and

honesty and evasion in the tax compliance game conventional models of tax compliance emphasize that taxpayers make strategic tax reports underreporting income to the extent that this behavior is functionally rewarded in contrast to this view considerable empirical evidence suggests that many taxpayers are inherently honest reporting truthfully regardless of the incentive to cheat in this article we build a game theoretic model of tax compliance that includes both honest and potentially dishonest taxpayers we show that including honest taxpayers significantly alters the model leading to much improved empirical predictions and somewhat different and novel policy implications

taxation with representation abstract in this paper a framework is developed for the joint analysis of tax preparation mode and tax non compliance estimation is performed using micro level audit data from the internal revenue service although tha availability of tax practitioners undoubtedly reduces many of the informational and computational barriers to tax compliance the results indicate that their use particularly the use of cpas and attorneys is associated with increased tax non compliance which may have negative implications for both tax equity and tax efficiency

corporate income tax evasion and managerial preferences this paper investigates the role of managerial preferences in shaping corporate income tax evasion using noncompliance with the personal income tax as a measure of taste for evasion the empirical results from a sample of corporate income tax returns show that managerial preferences play an important role in determining noncompliance with the corporate income tax basic sample tabulations show that when compared to compliant firms noncompliant firms are three times more likely to be managed by executives who have understated personal taxes in addition results from multivariate analyses suggest that the amount of underreported income is significantly higher in the presence of such executives

rural reforms and agricultural growth in china this paper employs province level panel data to assess the contributions of decollectivization price adjustments and other reforms to china s agricultural growth in the reform period decollectivization is found to improve total factor productivity and to account for about half of the output growth during 1978 84 the adjustment in state procurement prices also contributed positively to output growth its impact came mainly from the responses in input use the effect of other market related reforms on productivity and output growth was very small reasons for slowdown in agricultural growth after 1984 are also analyzed copyright 1992 by american economic association

thanks but no thanks a new policy to reduce land conflict abstract land conflicts in developing countries are costly both directly and through increased land degradation an important policy goal is to create respect for borders this often involves mandatory expensive interventions we propose a new policy design which in theory promotes neighborly relations at low cost a salient feature is the option to by pass regulation through consensus the key idea combines the insight that social preferences transform social dilemmas into coordination problems with the logic of forward induction as a first low cost pass at empirical evaluation we conduct an experiment among farmers in the ethiopian highlands a region exhibiting features typical of countries where borders are often disputed

business culture and tax evasion why corruption and the unofficial economy can persist abstract this paper shows that business and tax inspection culture can create multiple equilibria in bad equilibria high cheating and corruption increases in penalties or auditing can have perverse impacts and increase cheating the source of the multiple equilibria is the externalities created by business and tax inspection cultures as tax evasion and corruption become more common they become more acceptable and their cost is lowered a third externality that between firms and inspectors is the source of the perverse effect more cheating by firms is good for bribe taking inspectors and more bribe taking inspectors are good for cheating firms

effects of land fragmentation and returns to scale in the chinese farming sector using household survey data from rural china economies of scale as measured by returns to scale and the effects of land fragmentation on crop outputs are examined while these effects are found to be detrimental statistically significant and substantial existing economies of scale appear to be too small to suggest radical land policy changes in china

audit selection and income tax underreporting in the tax compliance game abstract this paper uses a game theoretic model of the tax compliance game to estimate a model of audit selection and income tax underreporting in jamaica the empirical analysis make use of audited tax returns for individual taxpayers and a random sample of tax returns for the population from which the audited returns are selected the estimation results strongly indicate a nonrandom audit strategy and thus provide support for the game theoretic approach the results also indicate that the probability of underreporting and the level of underreporting are positively related to the marginal tax rate and to income and negatively related to marginal payroll tax benefits in general the underreporting elasticities are small

land consolidation as technical change economic impacts in rural vietnam abstract this paper deepens the economic analysis of the effects of land consolidation reduction of land fragmentation it does this in the context of rural vietnam studying whether land consolidation promotes or hinders the vietnamese government s policy objectives of encouraging agricultural mechanization and stimulating the off farm rural economy the analysis views land consolidation as a form of technical change making it possible to apply the rich insights developed in the economic literature on that subject this treatment reveals that the economic impacts of land consolidation depend partly on its factor bias and partly on the degree to which labor is substitutable in production for other factors at a theoretical level if a technical change is factor neutral it will reduce off farm labor supply and slow rural structural transformation away from agriculture if it is labor augmenting and the elasticity of substitution between factors is low enough the opposite effects are predicted the paper studies these issues empirically for rice production in vietnam focusing on the impact that consolidation of rice land has on rice production machinery use and labor allocation the findings confirm that land consolidation raises both farm productivity and farm income and stimulates increased machinery use it also reduces farm labor supply lowers labor intensity in farming and thereby releases more farm labor to off farm development consistent with government policy objectives based on these findings the paper concludes that land consolidation should be encouraged through development of land ownership rights and the promotion of land rental markets

effects of technological change and institutional reform on production growth in chinese agriculture recent rapid agricultural production growth in chinese agriculture could be attributed to an increase in inputs technological change and institutional reform an accounting approach was used to separate the relative contribution of these three factors institutional change like the introduction of the household production responsibility system has contributed to past growth in production however technological change is crucial to furthering production growth because of the limited potential for significant increase in the use of conventional inputs in particular land continued institutional change must accompany corresponding technological changes

tax evasion concealment and the optimal linear income tax this paper incorporates tax evasion into the analysis of optimal linear income taxation taxevaders can influence the probability of being caught if audited through expenditures on concealment it is proved that tax evasion can make a given tax system more as well as less progressive depending on the concealment technology the paper derives and interprets simple formulas for characterizing the optimal tax rate and audit probability it also gives sufficient conditions under which tax evasion lowers the optimal tax rate while showing that an increase in the optimal tax rate is also possible

is environmental income reporting evasive in household surveys evidence from rural poor in laos abstract literature has consistently reiterated that the self employed non poor underreport their business income to tax authorities and in household surveys in this work we measure the extent to which poor households engaging in illegal environmental activities underreport income in laos we use a two year panel data and apply the engel curve to detect and estimate the reporting gap we further use a switching probit regression to identify the factors of income underreporting and its impact on income poverty outcomes results show that on an average rural households who earn at least a quarter of their income from the environment underreport by over 50 in household surveys resulting in overestimation of income poverty moreover we find that a perceived threat to food security drives rural poor to engage in illegal environmental extraction

using survey data to resolve the exchange risk exposure puzzle evidence from u s multinational firms while in previous literature foreign currency exposure is estimated to be surprisingly small and insignificant we question in this paper the rationality assumption and show that the traditional use of realized exchange rate changes to approximate unexpected currency shocks leads to a strong underestimation of the influence that exchange rates play in determining firm valuations in light of a unique survey data base of individual exchange rate expectations we distinguish between realized and unexpected foreign currency movements and find that half of our sample of 935 u s firms with real operations in foreign countries is significantly exposed to unexpected exchange rate movements in line with previously reported results foreign exchange risk exposure is found to become increasingly perceptible when the return horizon is lengthened the difference between the exposure to realized versus unexpected exchange rate movements is however decreasing when lengthening the horizon suggesting that the more market participants disagree about the future path of currency values the less investors and or managers are likely to use the publicly available forecasts in their pricing and hedging decisions

land fragmentation and food insecurity in ethiopia this paper revisits the economic consequences of land fragmentation taking seriously concerns regarding the exogeneity of fragmentation its measurement and the importance of considering impacts in terms of welfare metrics using data that are well suited to addressing these issues the analysis finds that land fragmentation reduces food insecurity this result is robust to how fragmentation is measured and to how exogeneity concerns are addressed further the paper finds that land fragmentation mitigates the adverse effects of low rainfall on food security this is because households with diverse parcel characteristics can grow a greater variety of crop types

minimum wage and tax evasion theory and evidence the paper investigates the role of the minimum wage in a competitive economy in which there is underreporting of earnings by employed labour the minimum wage induces higher compliance by some lowproductivity workers and transforms a nominally neutral scal system into a regressive one a spike in the wage distribution at the minimum wage level appears and a positive correlation between the size of the spike and the size of the informal economy is predicted and documented using cross country data for europe a further result is that employees whose o cially declared earnings appear to be boosted by a minimum wage hike actually experience a decline in their true income this prediction nds support in an empirical test using the massive increase in the minimum wage that took place in hungary in 2001 as a quasi natural experiment

tax evasion and social interactions the paper extends the standard tax evasion model by allowing for social interactions in manski s manski c f 1993 identification of endogenous social effects the reflection problem review of economic studies 60 3 531 542 nomenclature our model takes into account endogenous interactions i e social conformity effects exogenous interactions i e fairness effects and correlated effects our model is tested using experimental data participants must decide how much income to report given individual and group tax rates and audit probabilities and given a feedback on the other members reporting behavior myopic and self consistent expectations are considered in the analysis in the latter case the estimation is based on a two limit simultaneous tobit with fixed group effects a unique social equilibrium exists when the model satisfies coherency conditions in line with brock and durlauf brock w a durlauf s n 2001b interactions based models in j heckman and e leamer eds handbook of econometrics 5 elsevier science b v 3297 380 the intrinsic nonlinearity between individual and group responses helps identify the model our results provide evidence of fairness effects but reject social conformity

does land fragmentation increase the cost of cultivation evidence from india although a large literature discusses the productivity effects of land fragmentation measurement and potential endogeneity issues are often overlooked this paper uses several measures of fragmentation and controls for endogeneity and crop choice by looking at inherited paddy and wheat plots to show that these issues matter empirically while crop choice can mitigate effects fragmentation as measured by the simpson index increases production cost and fosters substitution of labor for machinery especially for small and medium farmers greater distances between fragments have a smaller effect creating opportunities for market based consolidation could be one step to limit fragmentation induced cost increases

the excess burden of tax evasion an experimental detection concealment contest abstract tax evasion may cause social welfare losses due to the incentives of taxpayers to invest in the concealment and of tax authorities to invest in the detection of tax evasion reducing the investment of both parties at the same time would then lead to a pareto improvement given that concealment and detection costs are hardly measurable in reality we show in a controlled laboratory experiment that the welfare losses from a concealment detection contest depend positively on the prevailing tax rate but not on the penalty which is imposed in case of detected tax evasion hence policy makers who are concerned about socially inefficient concealment and enforcement costs should focus on tax rates rather than penalty rates

completing china s move to the market beginning in late 1978 by luck as much as design china arrived at a strategy for market oriented economic reform that combined substantial reform with rapid growth in gdp and exports the sequencing of reform began with the easy to reform sectors agriculture and foreign trade and then took up the more difficult task of reforming the large state owned enterprises with respect to agriculture small scale industry and foreign investment china found ways of introducing meaningful property rights into the increasingly marketized system a partially unreformed financial system and inadequate autonomy of large state enterprises accounts however for the current stop go nature of chinese development

tax morale affects tax compliance evidence from surveys and an artefactual field experiment our working hypothesis is that cross cultural differences in tax compliance behavior have foundations in the institutions of tax administration and citizen assessment of the quality of governance tax compliance being a complex behavioral issue its investigation requires use of a variety of methods and data sources results from artefactual field experiments conducted in countries with substantially different political histories and records of governance quality demonstrate that observed differences in tax compliance levels persist over alternative levels of enforcement the experimental results are shown to be robust by replicating them for the same countries using survey response measures of tax compliance

employer tax evasion in the unemployment insurance program we use unique data to analyze employer tax compliance with unemployment insurance ui provisions the data indicate that employers may have underreported 728 million of ui taxes nationally in 1987 alone to formally examine this noncompliance a theoretical model of payroll tax evasion is developed showing that increasing payroll tax rates among other things likely increases noncompliance by risk neutral firms this prediction is empirically verified the finding that ui tax evasion is systematically related to various firm characteristics suggests that ui audits may be effectively targeted by statistical profiles derived from our model thereby improving compliance