Evaluating People's Support for and the Impact of Tax and Transfer Policies in Developing Countries
Creators: name: Hoy, Christopher
Publisher: name: The Australian National University
Year: 2020

description: This thesis consists of four papers in the field of applied microeconomics that apply rigorous evaluation techniques to explore two broadly connected research topics: public support for redistribution through tax and transfer policies in a range of countries; and the impact of flagship tax and transfer policies in a fragile state, Papua New Guinea (PNG). In Chapter 2, I test a key assumption of seminal theories about preferences for redistribution, which is that relatively poor people should be the most in favor of redistribution. I conduct a randomized survey experiment with over 30,000 participants across 10 countries, half of whom are informed of their position in the national income distribution. Contrary to prevailing wisdom, people who are told they are relatively poorer than they thought are less concerned about inequality and their support for redistribution is unchanged. This finding is driven by people using their own living standard as a "benchmark" for what they consider acceptable for others. In Chapter 3, I test the elasticity of people's voting intentions and preferences for redistribution to information about inequality through a large-scale, randomized survey experiment in Indonesia. Respondents either receive information about the level of national inequality, their position in the national income distribution or they receive no information. The first treatment raised people's concern about inequality and substantially increased the likelihood they would vote against the President. The second treatment lowered richer respondents' support for redistribution. These results provide empirical support from a significantly different political and economic context for seminal theories that predict high inequality leads to greater opposition to the incumbent. In Chapter 4, I examine whether "nudges" can increase tax revenue in settings that lack high rates of compliance and effective enforcement through two population-wide randomized control trials of firms in PNG. I test the impact of SMS messages and flyers that either remind SMEs of due dates or inform them about the public benefits from paying tax. Consistent with theories of tax evasion, the treatments increase compliance, but do not increase revenue. In Chapter 5, again on PNG, I examine whether there is an additional benefit from participating in a comprehensive Active Labor Market Program (ALMP) beyond completing a Labor Intensive Public Works Program (LIPW). Using a difference-in-difference identification strategy, I show participants that completed an ALMP were around twice as likely to be employed in the formal sector 9 to 12 months later. This finding is driven by employers using the program as a low cost, low risk and relatively low effort way of hiring new employees. Collectively, these papers illustrate a number of challenges facing policy makers seeking to reduce inequality through tax and transfer policies. I show it is incredibly difficult to increase public support for redistribution and that flagship policy initiatives to increase tax revenue and create opportunities for disadvantaged youth in PNG tend to have limited impact.