the evolution of institutions in india and its relationship with economic growth this paper examines the evolution in a few public institutions over time in india it presents three types of evidence on institutional outcomes such as losses in power generation backlogs in disposal of court cases on perceptions based measures of governance some going back to the 1960s and finally on customs administration and whether it has been more effective at detecting evasion over time all the evidence suggests that institutional quality has not improved over time it then addresses the two way relationship between growth and institutions in terms of two apparent paradoxes the first is why growth has turned around so dramatically in india despite the relatively limited nature of reforms especially compared with other countries the second paradox is why despite nearly 30 years of rapid growth institutions have not improved the paper offers some explanations that might help explain these paradoxes

entrepot trade and smuggling in west africa benin togo and nigeria official trade statistics indicate very little intra african trade but this is often because of the prevalence of unrecorded trade particularly smuggling this paper explores smuggling from benin and togo into nigeria nigeria has very high import tariffs and bans on certain products togo and benin have deliberately maintained low import barriers to facilitate an entrepot role vis a vis nigeria and land locked sahelian countries togo competes at a geographic disadvantage relative to benin for access to the nigerian market and compensates with lower transit taxes the volume and composition of cross border trade is analysed using data obtained from benin and togo customs authorities as well as interviews with traders and customs officials in both countries benin and to a lesser extent togo are the origin of a very large volume of transshipment of precisely those products which are heavily protected in nigeria such as used cars cloth and rice it is common knowledge in benin and togo that these imports although declared for domestic consumption or transit to other countries are in fact overwhelmingly intended for nigeria smuggling is a major source of income and employment in benin and togo but provides a fragile and unreliable foundation for economic development

u s ceos of sbus in luxury goods organizations a mixed methods comparison of ethical decision making profiles this study involved using a mixed method research design to examine the moral philosophy difference between the ethical decision making process of ceos in u s led and non u s led within the luxury goods industry the study employed a manova to compare the ethical profiles between the two leader types us and non us led and a phenomenological qualitative process to locate themes that give indication as to the compatibility of the luxury strategy values and practices with the principles and concepts of responsible leadership and conscious capitalism as the luxury goods industry is facing the first slowdown since 2000 pressure to achieve sales targets in the u s to make up for losses in other markets will place these ceos under extreme pressure from their headquarters these leaders must possess the ethical decision making capability to balance legal and moral dilemmas unique to multinational luxury goods organizations while delivering business results in a challenging environment results of the study show no evidence of difference in the ethical decision making profiles between the two groups of leaders the themes and emergent findings resulting from the qualitative analysis indicate a profound incompatibility between the values informing decision makers using the luxury strategy and those employed by leaders operating within the principles and parameters of responsible leadership and conscious capitalism recommendations for future research include replicating the study with a larger sample within a different geographic region or comparing leaders using the luxury strategy to those using conscious capitalism

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 simple economics of extortion evidence from trucking in aceh this paper tests whether the behavior of corrupt officials is consistent with standard industrial organization theory we designed a study in which surveyors accompanied indonesian truck drivers on 304 trips during which they observed over 6 000 illegal payments to police soldiers and weigh station attendants using plausibly exogenous changes in the number of checkpoints we show that market structure affects the level of illegal payments we further show that corrupt officials use complex pricing schemes including third degree price discrimination and a menu of two part tariffs our findings illustrate the importance of considering the market structure for bribes when designing anticorruption policy

taxes informality and income shifting evidence from a recent pakistani tax reform abstract this paper examines firm behavior to taxation in a low enforcement and large informality setting using quasi experimental variation created by a tax reform which increased taxation of partnerships substantially relative to firms of other legal form and the population of income tax returns filed in pakistan in 2006 11 i document that treated firms report significantly lower earnings migrate into informality and switch business form in response to the increase in tax rate the revenue loss caused by these behavioral responses is so large that by the third year after the reform the government was collecting less revenue than it would have without the tax increase this implies that the new tax rate was on the wrong side of the laffer curve and would not have been optimal under any social preferences the richness of the data and tax variation permits me to decompose the observed responses into real and evasion margins and to identify fiscal externalities created by the reform on other tax bases the welfare cost of the reform increases by around 40 once these externalities are taken into account

did iraq cheat the united nations underpricing bribes and the oil for food program from 1997 through 2003 the un oil for food program allowed iraq to export oil for humanitarian supplies we hypothesize that iraq deliberately set the price of its oil below market prices to solicit bribes from oil buyers by comparing the price gap between iraqi oil and its close substitutes during the program to the gap prior to the program we nd evidence of signican t underpricing our central estimate suggests that iraq collected 1 3 billion in bribes from underpricing its oil or 2 percent of oil revenues underpricing is higher during periods of high volatility in oil markets when detection is more dicult but declines after the un limited iraq s ability to set the price of its oil

china s land market auctions evidence of corruption this paper studies the urban land market in china in 2003 2007 in china all urban land is owned by the state leasehold use rights for land for re development are sold by city governments and are a key source of city revenue leasehold sales are viewed as a major venue for corruption prompting a number of reforms over the years reforms now require all leasehold rights be sold at public auction there are two main types of auction regular english auction and an unusual type which we call a two stage auction the latter type of auction seems more subject to corruption and to side deals between potential bidders and the auctioneer absent corruption theory suggests that two stage auctions would most likely maximize sales revenue for properties which are likely to have relatively few bidders or are cold which would suggest negative selection on property unobservables into such auctions however if such auctions are more corruptible that could involve positive selection as city officials divert hotter properties to a more corruptible auction form the paper finds that overall sales prices are lower for two stage auctions and there is strong evidence of positive selection the price difference is explained primarily by the fact that two stage auctions typically have just one bidder or no competition despite the vibrant land market in chinese cities

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 evasion under behavioral structures abstract we study the strategic interactions between the fiscal authority and the taxpayer regarding tax evasion and auditing we fit this interaction into a bayesian game and introduce the concept of behavioral consistency which helps reducing the number of available strategies and models the stylized fact according to which the choice to evade is subject to behavioral patterns

costs of taxation and the size of government existing theory on the form of government suggests that a parliamentary system promotes a larger size of government than does a presidential system this paper extends the existing theory by allowing for distortionary taxation a main result is that if taxation is sufficiently distortionary the parliamentary system may promote a smaller size of government than the presidential system the proposed mechanism appears consistent with several empirical patterns in the data that cannot be explained by other theories

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

corruption and cross border investment in emerging markets firm level evidence abstract this paper studies the joint impact of corruption on the entry mode and volume of inward foreign direct investment fdi using a unique firm level data set we find that corruption not only reduces inward fdi but also shifts the ownership structure towards joint ventures the latter finding supports the view that corruption increases the value of using a local partner to cut through the bureaucratic maze however r d intensive firms are found to favor sole ownership

using micro surveys to measure and explain corruption summary this paper discusses survey techniques aimed at a better measurement of corruption at the micro level and argues that with appropriate survey methods and interview techniques it is possible to collect quantitative micro level data on corruption public expenditure tracking surveys service provider surveys and enterprise surveys are highlighted with several applications these surveys permit measurement of corruption at the level of individual agents such as schools health clinics or firms they also permit the study of mechanisms responsible for corruption including capture of public funds and bribery 2005 elsevier ltd all rights reserved

tariff rates tariff revenue and tariff reform some new facts this article compares the statutory and valorem tariff rates official rates with the ratio of tariff revenues to import values collected rates for jamaica kenya and pakistan it identifies four general features of the tariff codes considers whether these features apply to all developing countries and discusses four implications of these features for tariff reform first the collected rate for any given item in the tariff code is only weakly related to the official rate for the item second the variation of collected rates on average increase much less than the official rates fourth the relation between official rates and collected rates is nonlinear because the slope is lower at higher levels of the official rate

electoral accountability and corruption evidence from the audits of local governments we show that political institutions affect corruption levels we use audit reports in brazil to construct new measures of political cor ruption in local governments and test whether electoral account ability affects the corruption practices of incumbent politicians we find significantly less corruption in municipalities where mayors can get reelected mayors with reelection incentives misappropriate 27 percent fewer resources than mayors without reelection incentives these effects are more pronounced among municipalities with less access to information and where the likelihood of judicial punish ment is lower overall our findings suggest that electoral rules that enhance political accountability play a crucial role in constraining politician s corrupt behavior jel d72 k42 017

integrity for hire an analysis of a widespread customs reform abstract can governments improve bureaucratic performance by hiring integrity from the private sector in the past 2 decades a number of developing countries have hired private firms to conduct preshipment inspections of imports generating independent data on the value and tariff classification of incoming shipments i find that countries implementing such inspection programs subsequently experience large increases in import duty collections by contrast the growth rate of other tax revenues does not change appreciably additional evidence suggests that declines in falsification of import documentation are behind the import duty improvements the programs also lead to declines in undervaluation and misreporting of goods classifications historically this hired integrity appears to have been cost effective with improvements in import duty collections in the first 5 years of a typical inspection program amounting to 2 6 times the program s costs

cleaning house the impact of information technology monitoring on employee theft and productivity this paper examines how firm investments in technology based employee monitoring impact both misconduct and productivity we use unique and detailed theft and sales data from 392 restaurant locations from five firms that adopt a theft monitoring information technology it product we use difference in differences models with staggered adoption dates to estimate the treatment effect of it monitoring on theft and productivity we find significant treatment effects in reduced theft and improved productivity that appear to be primarily driven by changed worker behavior rather than worker turnover we examine four mechanisms that may drive this productivity result economic and cognitive multitasking fairness based motivation and perceived increases of general oversight the observed productivity results represent substantial financial benefits to both firms and the legitimate tip based earnings of workers our results suggest that employee misconduct is not solely a function of individual differences in ethics or morality but can also be influenced by managerial policies that can benefit both firms and employees this paper was accepted by serguei netessine operations management

mutual supervision in preshipment inspection programs abstract preshipment inspection psi programmes are implemented in many developing countries to assist governments in the collection of revenue at their borders these programs consist of the delegation of the inspection of imports to a private firm to study these psi programmes we develop a hierarchical agency model in which the government authority can rely on two supervisors namely the private inspection firm and the customs administration to control importers declarations the government s optimal contract is fully characterized we devote some attention to the inspection policy and its comparative statics properties in particular we identify the situations in which psi programmes are revenue enhancing we also discuss the reconciliation policy i e what to do in case of conflicting inspection reports by the inspection firm and the customs administration in the optimal mechanism mutual supervision between the inspection firm and the customs administration is used to provide adequate incentives to all parties

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