measuring and improving the performance of customs valuation controls an illustration with gabon modern customs administrations aim to both facilitate legal trade and combat fraud to meet this dual objective many customs administrations in developing countries must give risk management a highly prominent role in this context of modernisation this paper first provides stylised facts on the performance of the customs controls carried out at the gabon border then we compare gabon s granular import customs data with international trade statistics based on this comparison we identify undetected fraud and present a methodology to target ex post audits finally we define indicators to monitor the performance of customs valuation controls

an empirical analysis of state and private sector provision of water services in africa under pressure from donor agencies and international financial institutions such as the world bank some developing countries have experimented with the privatization of water services this article reviews the econometric evidence on the effects of water privatization in developing economies and presents new results using statistical data envelopment analysis and stochastic cost frontier techniques and data from africa the analysis fails to show evidence of better performance by private utilities than by state owned utilities among the reasons why water privatization could prove problematic in lower income economies are the technology of water provision and the nature of the product transaction costs and regulatory weaknesses

cost reduction competition and industry performance in many markets firms compete over time by expending resources with the purpose of reducing their costs sometimes the cost reducing investments operate directly on costs in many instances they take the form of developing new products that deliver what customers need more cheaply therefore product development can have the same ultimate effect as direct cost reduction in fact if one thinks of the product as the services it delivers to the customer in the way that lancaster pioneered then product development often is just cost reduction

information transmission cournot and bertrand equilibria we examine how incentives for two duopolists to honestly share information change depending upon the nature of competition cournot or bertrand and the nature of the information structure while in earlier papers uncertainty is about an unknown common demand intercept in the present paper uncertainty is about unknown private costs the different information structure reverses the incentives to share information while with unknown common demand sharing is a dominant strategy with bertrand competition and concealing is a dominant strategy with cournot competition with unknown private costs sharing is a dominant strategy with cournot competition and concealing is a dominant strategy with bertrand competition

tariff evasion and rules of origin violations under the canada u s free trade agreement using product level data on trade between canada and the u s this paper presents evidence of tariff evasion and violation of the rules of origin occurring under the canada u s free trade agreement cusfta it shows that more imports go unreported at the destination country when tariffs are higher consistent with the tariff evasion hypothesis this result implies that the trade creation effect of a free trade agreement may in fact be due to less underreporting further this paper shows that the larger canadian tariff preference margin for the u s is associated with more goods originating in third countries being transshipped through the u s territory for re export the preference margin is also positively correlated with the value of excess imports from the u s which qualify for preferential treatment both results suggest the presence of persistent violations of cusfta s rules of origin a l aide de donnees au niveau des produits sur les flux de commerce entre le canada et les etats unis on montre qu il y a evitement de tarif et violation des regles d origine dans les operations de l accord de libre echange canada etats unis on montre que davantage d importations ne sont pas declarees au point de destination quand les tarifs sont eleves dans l esprit meme de l hypothese d evitement de tarif ce resultat implique que l effet de creation de commerce d un accord de libre echange peut en fait etre attribuable a moins de sous declaration de plus le texte montre que les plus grandes marges preferentielles des tarifs avec les etats unis sont associees a davantage de biens en provenance de tiers pays et convoyes a travers le territoire americain pour re exportation la marge preferentielle est aussi positivement co reliee avec la valeur des importations excedentaires en provenance des etats unis qui se qualifient pour un traitement preferentiel ces deux ensembles de resultats suggerent la presence persistante de violations des regles d origine de l accord de libre echange canada etats unis

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

how different is the efficiency of public and private water companies in asia several studies have compared the efficiency of publicly and privately owned water utilities and reached conflicting conclusions on the impact of ownership on efficiency this article provides further evidence by estimating a stochastic cost frontier for a sample of asian and pacific regional water companies the results show that efficiency is not significantly different in private companies than in public ones

quota hopping in bond diversion we show that the u s in bond system of imports may be used by firms to illegally avoid trade barriers a practice known as in bond diversion the illicit scheme involves declaring chinese exports bound for mexico but diverting them to the u s market while in transit thus creating a gap between chinese and mexican reports using the phaseout and removal of u s quotas at the end of the multifiber agreement as a policy experiment as well as variation in quota bindingness across products we show that quota bound products were associated with larger trade gaps which shrunk following the quota removals jel f13 o17 o19

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

the peter pan syndrome in emerging markets the productivity transparency trade off in it adoption firms invest in technology to increase productivity yet in emerging markets where a culture of informality is widespread information technology it investments leading to greater transparency can impose a cost through higher taxes and the need for regulatory compliance the tendency of firms to avoid productivity enhancing technologies and remain small to avoid transparency has been dubbed the peter pan syndrome we examine whether firms make the trade off between productivity and transparency by examining it adoption in the indian retail sector we find that computer technology adoption is lower when firms are motivated to avoid transparency specifically technology adoption is lower when there is greater corruption but higher when there is better enforcement and auditing so firms have a higher productivity gain threshold to adopt computers in corrupt business environments that suffer from patchy and variable enforcement of the tax laws not accounting for this motivation to hide from the formal sector underestimates productivity gains from computer adoption thus in addition to their direct effects on the economy enforcement auditing and corruption can have indirect effects through their negative impact on adoption of productivity enhancing technologies that also increase operational transparency

environmental quality competition and eco labeling abstract a three stage game of investment environmental quality provision and price competition is developed to study the impact of green technology investment eco labeling in a duopoly model of vertical product differentiation the firms incentives to invest in green technologies depend on their relative cost structure when firms are identical with respect to fixed costs both firms will always invest but if one firm is more efficient in investing then the other firm may or may not invest depending on the level of unit cost of investment quality competition will be tighter when the low quality firm is more efficient and looser when the high quality firm is more efficient in investing socially optimal investment for both firms is always positive but lower than in the duopoly solution in the absence of environmental externalities the quality dispersion chosen by profit maximizing firms may be too high or too low while environmental externalities increase the possibility low quality dispersion that is too low within the market solution finally and importantly ecolabeling can be used as a means of reducing excessive investment and increasing environmental quality that is too low

disclosure strategies for pollution control disclosure strategies which involve public and or private attempts to increase the availability of information on pollution form the basis for what some have called the third wave in pollution control policy after legal regulation the first wave and market based instruments the second wave while these strategies have become common in natural resource settings forest certification and organic farming for example they are less familiar in a pollution control context yet the number of applications in that context is now growing in both oecd and developing countries this survey will review what we know and don t know about the use of disclosure strategies to control pollution and conclude with the author s sense of where further research would be particularly helpful

dea and its use in the regulation of water companies abstract this paper begins with an introduction to the basic principles of data envelopment analysis dea dea is a linear programming based method for assessing the productive efficiencies of operating units such as bank branches sales outlets schools or individuals this paper then goes on to describe the use of dea in the regulatory framework regulation employed to safeguard the public interest is increasingly playing an major role in great britain and other countries in the aftermath of the privatisation of publicly owned companies including utilities which still enjoy a good degree of monopoly power this paper gives an account of the use of dea to estimate potential cost savings at water companies in the context of the price review conducted by the regulator of water companies in england and wales in 1994 it also highlights certain generic issues arising in the use of dea in the regulatory context this paper should prove of interest both to those who want to know about dea as a tool in general and to those interested in efficiency measurement under regulation

strategy research governance and competence perspectives business strategy is a complex subject and is usefully examined from several perspectives this paper applies the lenses of governance and competence to the study of strategy both the governance and the competence perspectives have had the benefit of distinguished antecedents they have also had to deal with tautological reputations i begin with the governance perspective with emphasis on the six key moves through which it has been operationalized i then examine the competence perspective in these same six respects governance challenges the competence perspective to apply itself more assiduously to operationalization including the need to choose and give definition to one or more units of analysis of which the routine is a promising candidate the research challenges posed by competence to which governance can and should respond include dynamic transaction costs learning and the need to push beyond generic governance to address strategy issues faced by particular firms with their distinctive strengths and disabilities a lively research future for these two perspectives individually and in combination is projected copyright 1999 john wiley sons ltd business strategy is an expansive enterprise not only do all of the functional areas in the business school relate but strategy is by nature interdisciplinary all of the social sciences especially economics and organization theory plus contract law are implicated indeed in the high technology arena where some of the most difficult strategy issues reside engineering and the law on intellectual property rights also have a bearing of the various approaches to the study of strategy this paper focuses on the governance and competence perspectives both perspectives combine economic reasoning with organization theory as between these two the governance

different shades of green global oil and gas companies and renewable energy abstract the long term energy transition from fossil fuels to renewable energy raises critical questions about the future of oil and gas firms this study asks why some oil and gas firms are committed to renewable energy while others continue to maintain a distinct fossil fuels focus with little or no investment in renewable energy the analysis reveals that there is a wide range in the degree to which oil and gas firms have invested in renewable energy some firms have no investments and others have investments in multiple renewable energy technologies across many countries we examine a combination of country based institutional factors and firm based knowledge and experience factors that could impact oil and gas firms decisions to invest in renewable energy activity regulative and normative pressures impacted renewable energy investments as did environmental citizenship and the degree of internationalization the study s integration of country level factors with firm level experiences provides insights into how firms are dealing with the energy transition by examining areas such as sustainability and regulatory policy the paper sheds light on the ways in which scholars can tap into measures and methods that can extend traditional ib research

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

firm incentives to promote technological change in pollution control reply abstract the process of technological change in pollution control is broken into three basic steps innovation diffusion and optimal agency response firm incentives to promote these steps are then examined under five regulatory regimes direct controls emission subsidies emission taxes free marketable permits and auctioned marketable permits on a relative basis emission taxes and auctioned permits provide the highest firm incentives to promote technological change at times free permits generate lower incentives direct controls which are common regulatory tools usually provide the lowest relative firm incentives to promote technological change

toward a theoretical model of voluntary overcompliance abstract we explain why some firms voluntarily overcomply with environmental regulation in our model all consumers value environmental quality but differ in their willingness to pay which depends on their income levels publicly available information on environmental performance of firms enables consumers to identify clean firms firms participate in a two stage duopoly game where they first choose their levels of cleaning technology and next engage in price competition the market gets segmented by income levels a minimum standard binding on the dirty firm has the effect of improving the performance of the cleaner firm a subsidy obtains the same competitive outcome

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

taxation with costly administration the concept of a tax technology is used here as providing a unified framework for analyzing both administrative activity by tax authorities and tax resisting activity by taxpayers this framework provides a simple formalization of adam smith s four components of tax costs administration substitution active noncompliance and passive compliance the model is used to derive policy implications concerning the proper measurement of the cost of public funds and concerning the criterion for optimal administration

wto accession and tariff evasion abstract this study documents some unintended consequences of the world trade organization wto membership by providing evidence on displacement of tariff evasion driven by the wto accession process the analysis focuses on the wto customs valuation agreement cva which limits the discretion of customs officials when it comes to assessing the price of imports while prior to the wto accession customs officials are free to use their own judgment or apply minimum or reference prices after their country joined the wto they are mandated to accept the invoice price issued by the exporter if customs officials enjoy discretion with respect to assessing the import price they may assist importers with tariff evasion in exchange for bribes removing such discretion limits their ability to facilitate misrepresentation of import prices using data on 15 countries which joined the wto between 1996 and 2008 we find a positive relationship between underreporting of import prices and the tariff rate which is expected as the incentive to evade increases with the tariff rate importantly this relationship disappears after a country joins the wto this result is consistent with the cva closing one channel for corrupt behavior however we also find that changes to customs valuation procedures induce importers to seek alternative ways of tariff evasion such as underreporting of quantities and product misclassification the overall level of evasion remains unchanged

exchange of cost information in oligopoly when do oligopolists gain by sharing their private information about their costs with one another what are the social welfare effects of such information exchange i study these questions by comparing the oligopolists expected profits under a cost sharing agreement with their expected profits in the bayesian equilibrium that would arise without cost sharing i also analyse the firms decisions to form a trade association to share their cost data under conditions of linear demand and cournot behaviour industrywide information exchange is the unique point in the core of the trade association membership game the exchange of cost data increases expected profits and welfare but reduces expected consumer surplus cost sharing increases efficiency by raising the market shares of lower cost firms and reducing the variability of aggregate output consumer surplus is diminished however because the variance of output is reduced and consumer surplus is a convex function of output

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 optimal elasticity of taxable income abstract the strength of the behavioral response to a tax rate change depends on the environment individuals operate in and may be manipulated by instruments controlled by the government we first derive a measure of the social benefit to affecting this elasticity the paper then examines this effect in the solution to the optimal income taxation problem when such an instrument is available first in a general model and then in an example when the government chooses the income tax base

tariffs enforcement and customs evasion evidence from india we examine the effect of tariff policies on evasion of customs duties in the context of the trade reform in india of the 1990s by exploiting the variation in tariff rates across time and products we identify a robust positive elasticity of evasion with respect to tariffs a second contribution of the paper is to provide some evidence on the impact of enforcement while we cannot identify the direct impact of enforcement on evasion we can establish the extent to which enforcement related factors such as product characteristics that determine the ease of detection of evasion affect the evasion elasticity the results render support to the hypothesis that improvements in enforcement can reduce the responsiveness of evasion to tariffs

can ecolabeling schemes preserve the environment a three stage game of production technology signal and price competition is developed to study the impact of eco labeling in a duopoly model of vertical product differentiation the production technology and the subsequent pollution level are non observable by consumers the only way to inform consumers about the environmental quality of the product is to stick an ecolabel on it however a polluting firm may also usurp the ecolabel by incurring a certain cost by assuming that consumers are altruistic and willing to pay for environmental quality we show that ecolabels can reduce the pollution level finally and importantly under restrictive conditions on labeling cost ecolabeling can constitute to some extent an environmentally effective and economically efficient policy however ecolabeling cannot alone internalize the whole negative externality until the optimum point

strategic information revelation we analyze the problem in which agents have non public information and are to play an asymmetric information game the agents may reveal some or all of their information to other agents prior to playing this game revelation is via exogenously specified certifiable statements the equilibria resulting from various revelation strategies are used to determine equilibrium revelation of information sufficient conditions are provided for complete revelation of all private information a number of examples are provided illustrating when revelation will or will not occur in commonly analyzed games many economic problems are characterized by the presence of both strategic behaviour on the part of individuals and by asymmetric information models encompassing both of these characteristics have been used successfully to examine questions in many fields usually using the concept of bayesian nash equilibrium as the solution concept typically the agents information is given exogenously and is fixed throughout the analysis modelling the information structure as static is appropriate for some problems but not for all in particular situations that are inherently dynamic most economic encounters allow for some interchange between the agents before the outcome is settled irrevocably in such circumstances it is possible that at least one or more of the agents possessing non public information may be able to reveal part or all of his information to one or all of the other agents in the economy during the course of their contact to the extent that such a communication is believed by the other agents the priors of the other agents will change and we will have what is in essence a new asymmetric information game new in

information as regulation the effect of community right to know laws on toxic emissions abstract there is growing academic and policy level interest in the use of information as quasi regulatory mechanisms such as toxic release inventory tri and green labels mandatory disclosure requirements have been touted as market based incentives that may affect firm behavior we provide new evidence on the effectiveness of disclosure requirements by examining firm behavior in response to disclosures of tri emissions we find that firms with the largest stock price decline on the day this information became public subsequently reduced emissions more than their industry peers this is consistent with the view that financial markets may provide strong incentives for firms to change their environmental behavior

the effect of tax enforcement on tax elasticities evidence from charitable contributions in france optimal tax formulas expressed in sufficient statistics are usually calibrated under the assumption that the relevant tax elasticities are unaffected by other available policy instruments in practice though tax authorities have many more instruments than the mere tax rates and tax elasticities are functions of all these policy instruments in this paper we provide evidence that tax elasticities are extremely sensitive to a particular policy instrument the level of tax enforcement we exploit a natural experiment that took place in france in 1983 when the tax administration tightened the requirements to claim charitable deductions the reform led to a substantial drop in the amount of contributions reported to the administration which can be credibly attributed to overreporting of charitable contributions before the reform rather than to a real change in giving behaviours we show that the reform was also associated with a substantial decline in the absolute value of the elasticity of reported contributions this finding allows us to partially identify the elasticity of overreporting contributions which is shown to be large and inferior to 2 in the lax enforcement regime we further show using bunching of taxpayers at kink points of the tax schedule that the elasticity of taxable income also experienced a significant decline after the reform our results suggest that optimizing the tax rate for a given tax elasticity when other policy instruments are not optimized can lead to misleading conclusions when tax authorities have another instrument that could set the tax elasticity itself at its optimal level as in kopczuk and slemrod 2002

the use of data envelopment analysis in the regulation of uk water utilities water distribution abstract regulation is increasingly playing a major role in defence of the public interest in the uk and other economies in the aftermath of the privatisation of utilities operating in near monopoly environments this paper gives an account of the use of data envelopment analysis dea by the regulator of water companies in england and wales in 1994 in the context of setting price limits dea is a general purpose linear programming based method for assessing the productive efficiencies of operating units such as bank branches or schools the paper details the use of dea to estimate potential savings in the specific context of water distribution and discusses the use of the results obtained it also highlights certain generic issues arising in the use of dea and more generally performance measurement methods in the regulatory context

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

is more competition always better an experimental study of extortionary corruption using a laboratory experiment we assess whether increasing competition among public officials reduces extortionary corruption we find that increasing the number of providers has no effect on bribe demands when citizens search costs are high but it increases corruption when search costs are low the effect is absent in a parallel setting framed as a standard market which we attribute to citizens using a nonsequential search strategy as opposed to sequential search in the corruption setting we conclude that efforts to reduce search costs such as infrastructure investments are preferable to anti corruption policies aimed at increasing the number of providers jel d73 d49 c91

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

why pay more corporate tax avoidance through transfer pricing in oecd countries this paper presents suggestive evidence of income shifting in response to differences in corporate tax rates for a large selection of oecd countries we use a new method to disentangle the income shifting effects from the effects of tax rates on real activity our baseline estimates suggest that a substantial share of the revenues from a unilateral increase in the corporate tax rate is lost because of a decline in reported income

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

a theory of yardstick competition in the typical regulatory scheme a franchised monopoly has little incentive to reduce costs this article proposes a mechanism in which the price the regulatedfirm receives depends on the costs of identical firms in equilibrium each firm chooses a socially efficient level of cost reduction the mechanism generalizes to cover heterogeneous firms with observable differences medicare s prospective reimbursement of hospitals by using diagnostically related groups is a scheme very similar to the one outlined here

toxics release information a policy tool for environmental protection abstract this study examines investor reactions to the repeated public disclosure of environmental information about firms in the chemical industry and the effectiveness of this information as a decentralized mechanism for deterring their pollution by allowing investors to benchmark the performance of firms repeated provision of the toxics release inventory led firms to incur statistically significant negative stock market returns during the one day period following the disclosure of that information in the years 1990 1994 these losses had a significant negative impact on subsequent on site toxic releases and a significant positive impact on wastes transferred off site but their impact on total toxic wastes generated by these firms is negligible

the impact of liberalization on the productive efficiency of indian commercial banks abstract we examine the productive efficiency of 70 indian commercial banks during the early stages 1986 1991 of the ongoing period of liberalization we use data envelopment analysis to calculate radial technical efficiency scores we then use stochastic frontier analysis to attribute variation in the calculated efficiency scores to three sources a temporal component an ownership component and a random noise component we find publicly owned indian banks to have been the most efficient followed by foreign owned banks and privately owned indian banks we also find a temporal improvement in the performance of foreign owned banks virtually no trend in the performance of privately owned indian banks and a temporal decline in the performance of publicly owned indian banks we attempt to explain these patterns in terms of the government s evolving regulatory policies

political connections and tariff evasion evidence from tunisia are politically connected firms more likely to evade taxes this paper presents evidence suggesting firms owned by president ben ali and his family were more prone to evade import tariffs during ben ali s reign evasion gaps defined as the difference between the value of exports to tunisia reported by partner countries and the value of imports reported at tunisian customs were correlated with the import share of connected firms this association was especially strong for goods subject to high tariffs and driven by underreporting of unit prices which diminished after the revolution consistent with these product level patterns unit prices reported by connected firms were lower than those reported by other firms and declined faster with tariffs than those of other firms moreover privatization to the ben ali family was associated with a reduction in reported unit prices whereas privatization per se was not

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

incentives for information production and disclosure in a duopolistic environment this paper examines the nature of the equilibrium solution to the duopoly problem under various incomplete information structures and the incentives to produce and disclose information attention is focused on the duopolists cost functions the results indicate that disclosure of such information is generally beneficial to the duopolists

the performance of german water utilities a semi parametric analysis germany s water supply industry is characterized by a multitude of utilities and widely diverging prices possibly resulting from structural differences beyond the control of firms management but also from inefficiencies in this article we use data envelopment analysis and stochastic frontier analysis to determine the utilities technical efficiency te scores based on cross sectional data from 373 public and private water utilities in 2006 we find large differences in te scores even after accounting for significant structural variables like network density share of groundwater usage and water losses

evasion behaviors of exporters and importers evidence from the u s china trade data discrepancy abstract since the late 1990s reported u s imports from china and hong kong have regularly and increasingly exceeded reported exports of china and hong kong to the united states this discrepancy which is not caused by re exporting through hong kong varies by product categories and in some cases takes the opposite sign in this paper we focus on china s direct exports to the united states using a model that allows for simultaneous misreporting to two authorities we find strong statistical evidence of under reporting exports at the chinese border to avoid paying value added tax vat the value of vat avoided is estimated at 6 5 billion during 2002 2008 and the associated understatements account for approximately two thirds of the discrepancy we also provide evidence of tariff evasion at the u s border in particular for related party transactions and indirect evidence of transfer pricing and evasion of chinese capital controls an estimated 2 billion of u s tariff revenue is lost due to such evasion during 2002 2008 which reduces the apparent size of the statistical discrepancy

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

efficiency in the public and private french water utilities prospects for benchmarking this article uses a data envelopment analysis dea and a stochastic frontier analysis sfa to assess the relative technical efficiency of 177 decision making units in the french water supply sector in 2009 water utilities can be directly managed by the local authorities or contracted out and then managed by a private operator the use of a three stage model mixing dea and sfa enables us to dissociate managerial inefficiencies from the structural inefficiencies and statistical noise after having taken the environmental variables into account we find that private management are on average slightly less efficient than public management an explanation to this performance gap can be different resource management

redistribution when avoidance behavior is heterogeneous abstract the optimal income taxation framework is extended to account for heterogeneity in avoidance behavior the optimal tax formulae are shown to be simply and intuitively modified to reflect the value of taxable income as an indicator of the need for transfers at a given skill level this effect is in addition to any effect implied by just considering additional margins of response to taxes alternative sources of heterogeneity and their likely consequences are discussed when the choice of administration is added to the model it is demonstrated that the optimal tax system may include some seemingly wasteful avoidance schemes even if they could be eliminated without any cost when an avoidance scheme is more heavily used by the needy it may provide additional redistribution without affecting standard incentive constraints

tax evasion and optimal environmental taxes abstract this paper introduces a new argument to the debate about the role of environmental taxes in modern tax systems some environmental taxes particularly taxes on gasoline or electricity are more difficult to evade than taxes on labor or income when the tax base is shifted in a revenue neutral manner toward these environmental taxes the result is a net reduction in the amount of tax evasion using a carbon tax as a motivating example the tax evasion effect is shown to sharply reduce the welfare cost of controlling emissions a simple computable general equilibrium model suggests that the impact of considering tax evasion can be large costs are lowered by 28 in the united states by 89 in china and by 97 in india in countries with high levels of pre existing tax evasion a carbon tax will pay for itself through improvements in the efficiency of the tax system

incentives for advanced pollution abatement technology at the industry level an evaluation of policy alternatives abstract in this research we evaluate the incentive effects of five environmental policy instruments to promote the development and adoption of advanced pollution abatement technology in a heterogenous industry from most to least incentive the policy instruments can be rank ordered as follows i auctioned permits ii emissions taxes and subsidies iii issued marketable permits iv performance standards including performance standards in this list necessitates the assumption that they are differentiated between heterogeneous firms before the technology adoption in a way which replicates the initial emissions control distribution of the efficient incentive based instruments with the starting point normalized in this fashion the instrument rankings are invariant with respect to the size of firms the size of the industry or the industry s abatement cost structure

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

fixing the leak in okun s bucket optimal tax progressivity when avoidance can be controlled this paper examines optimal income tax progressivity when avoidance responses to taxation are important and can be controlled at some cost by the government a simple example shows that ignoring the fact that avoidance can be controlled that the leak in okun s bucket can be fixed can lead to misleading implications about the optimal degree of tax rate progressivity the paper then generalizes the standard modei of the optimal linear income tax to include taxpayer avoidance behavior and the ability of government to control the avoidance but not the labor supply response to higher marginal tax ites the discussion suggests that if the tax burden is to be made more progressive base broadening and increased enforcement ought to be considered as alternatives or complements to increasing tax rates for high income individuals

public policy towards r d in oligopolistic industries the importance of determining optimal policy towards r d cannot be exaggerated given the worldwide interest in fostering r d and given the significant differences between european and u s policies towards interfirm cooperation on r d moreover the problem is an inherently difficult one because of the complex nature of the r d process since r d is a component of fixed costs industries where it is important tend to be concentrated hence r d policy must go hand in hand with competition policy at the same time r d is like any form of investment in that it precedes the production stage hence issues of time consistency and strategic commitment inevitably arise in considering the choice of r d policy finally r d by one firm typically leads to spillovers wbich benefit other firms so that r d exhibits many of the character department of economics university college dublin belfield dublin 4 ireiatid for helpful discussions and comments we are grateful to two anonymous referees to pedro bartos steve martin massimo motta and damien neven and to participants at seminars in birmingham st andrew s and warwick at a cepr workshop on r d spillovers in lausanne at erwit 94 in caslel gandolfo eea 95 in prague the 1996 conference on industrial economics at universidad carlos iii de madrid and a meeting of the dublin economics workshop this paper was produced as part of the international economic performance programme of the centre for economic performance london school of economics supported by the u k esrc an earlier version was circulated as cepr discussion paper no 1243 see alexis jacquemin 1988 and stephen martin 1996 istics of a public good albeit one that is mostly privately produced tbe degree to which such spillovers occur and can be internalized is another crucial influence on the desirable pattem of intervention

capital flight to germany two alternative measures abstract we use two measures to study two capital flight channels for germany one measure is based on the concept of trade misinvoicing and one on net claims and liabilities in the eurosystem of central banks for both measures we propose refinements to enhance the assessment of capital flight we find that capital flight towards germany via these two channels has been quite sizable in the recent decade and can tally to about 2 of gdp annually regarding their determinants we show that the two capital flight measures are driven by both common and measure specific factors traditional determinants such as covered interest differentials only play a limited role while crisis specific factors such as economic policy uncertainty the ecb collateral policy as well as currency misalignment are driving factors of the investors apparent flight to safety behavior

tax bases tax rates and the elasticity of reported income abstract tax reforms usually change both tax rates and tax bases using a panel of income tax returns spanning the two major u s tax reforms of the 1980s and a number of smaller tax law changes i find that the elasticity of income reported on personal income tax returns depends on the available deductions this highlights that this key behavioral elasticity is not an immutable parameter but rather that it can be to some extent controlled by policy makers one implication is that base broadening reduces the marginal efficiency cost of taxation the results are very similar for all income categories indicating that the rich are more responsive to tax rates because tax rules that apply to them are different their tax base is narrower the point estimates indicate that the tax reform act of 1986 reduced the marginal cost of collecting a dollar of tax revenue with roughly half of this reduction due to the base broadening and the other half due to the tax rate reduction as a by product the analysis in this paper offers a reconciliation of disparate estimates obtained by previous studies of the tax responsiveness of income

consistency in performance rankings the peru water sector regulators can utilize a number of alternative methodologies for comparing firm efficiency but these approaches need to be robust to be accepted by stakeholders this study evaluates the consistency of water utility performance rankings for peruvian water utilities the results indicate that data envelopment analysis dea and stochastic frontier analysis sfa yield similar rankings in this case in addition the techniques have comparable success for identifying the best and worst performing utilities however these rankings based on sophisticated statistical techniques are not highly correlated with those developed by the peruvian water regulator sunass this result does not invalidate the performance rankings obtained by the regulator since those rankings are based on more dimensions of utility performance however they illustrate the importance of developing sound techniques for identifying weak utilities improvements in sector performance require that benchmarking be given greater attention t

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

dynamic incentives by environmental policy instruments a survey abstract in this paper i survey and discuss recent developments on the incentives provided by environmental policy instruments for both adoption and development of advanced abatement technology a main conclusion to be drawn from the literature is that under competitive conditions market based instruments usually perform better than command and control moreover taxes may provide stronger long term incentives than tradable permits if the regulator is myopic if the government can anticipate new technology or is able to react on it optimally regulatory policies by virtue of administered prices taxes and policies by setting quantities issuing tradable permits are almost equivalent the literature also shows that under competitive conditions there is no difference between auctioning permits and grandfathering moreover timing and commitment of environmental policy is not crucial for adoption under competitive conditions commitment has positive incentive effects however if an r d sector has market power in the presence of market imperfections the ranking of the different policy instruments is ambiguous

building state capacity evidence from biometric smartcards in india anti poverty programs in developing countries are often dicult to implement in particular many governments lack the capacity to deliver payments securely to targeted beneciaries we evaluate the impact of biometrically authenticated payments infrastructure smartcards on beneciaries of employment nregs and pension ssp programs in the indian state of andhra pradesh using a large scale experiment that randomized the rollout of smartcards over 158 subdistricts and 19 million people we nd that while incompletely implemented the new system delivered a faster more predictable and less corrupt nregs payments process without adversely aecting program access for each of these outcomes treatment group distributions rst order stochastically dominated those of the control group the investment was cost eective as time savings to nregs beneciaries alone were equal to the cost of the intervention and there was also a signicant reduction in the leakage of funds between the government and beneciaries in both nregs and ssp programs beneciaries overwhelmingly preferred the new system for both programs overall our results suggest that investing in secure payments infrastructure can signicantly enhance state capacity to implement welfare programs in developing countries

development and application of the hicks moorsteen productivity index for the total factor productivity assessment of wastewater treatment plants abstract the assessment of the productivity change in wastewater treatment plants is essential to improve performance and reduce operational costs several indices are available to compute unit productivity however some assessments are more reliable than others in the absence of price data the malmquist productivity index is the most commonly applied but it does not maintain total factor productivity properties under variable returns to scale technology hence malmquist productivity index is not a suitable index to compute total factor productivity change in wastewater treatment plants the present study served to overcome such limitations by calculating for the first time total factor productivity changes in a sample of 204 spanish wastewater treatment plants using the hicks moorsteen productivity index it is a multiplicatively complete index which can be decomposed as several sub indices representing technical and efficiency changes therefore this study also investigated the drivers of total factor productivity change in wastewater treatment plants results showed a 5 4 total factor productivity decline per year from 2003 to 2008 in the plants analysed the primary driver in the reduction was efficiency change alternatively technical change improved during the five years of study the results of this study provide support for policymakers and managers in decision making processes and contribute to the improvement of technical and economic wastewater treatment plants performance in addition it is evidenced that wastewater treatment plants current dependence on external energy sources should be reduced to improve productivity and reduce costs to citizens who pay for wastewater treatment services

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

voluntary disclosure and investment in environmental technology abstract i examine the role of voluntary disclosure programs in creating market incentives for competing firms to invest in environmentally cleaner technology in an industry subject to environmental regulation such as emission taxes such programs may allow firms to credibly disclose their progress in achieving compliance cost reduction through investments in internal rd the outcome of the investment is private information i show that the ex ante incentive to invest is always higher in the presence of the voluntary disclosure program than without it in particular the opportunity to credibly disclose progress in cost reduction allows a successful firm to convey its true position of competitive advantage to the rival firm and realize higher market share and profit thus voluntary disclosure programs increase the efficacy of traditional forms of environmental regulation in creating incentives for green technological change even when buyers have no preference for greener technology i show that such programs generally increase social welfare

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