Economics: Research Guide

This study investigates the link between taxation and fertility in South Korea, focusing on the historical period surrounding the mid-70s tax reforms. The longstanding decline in fertility rates has been widely discussed in relation to factors such as increasing human capital, women’s employment, and rising housing costs, leading couples to postpone or forego childbearing decisions. However, less attention has been paid to how tax policies that influence disposable income and economic planning horizons could indirectly affect fertility choices. While taxation is crucial for funding social security systems, policies that reduce household resources without considering demographic impacts may..

Rising rents, often attributed to a shortage of available housing, spotlight the urgent need to accelerate housing construction, particularly in Boston and other “superstar cities” where rents have been rising acutely. This report looks at the potential efficacy and costs of one particular policy option to jump-start residential construction: incentivizing developers to build by granting them tax abatements for new construction.

This paper concerns the timing of taxation in an economy with trade unions. By using insights from the industrial organization literature, we show within the framework of an overlapping generations model where agents work in the first period of life and are retired in the second that trade unions can obtain an advantageous bargaining outcome vis-à-vis firms by delegating authority to a negotiator who (i) discounts the future at a higher rate than the union members, and (ii) treats the workers´ labor supply and saving decisions as given. In this context, the timing of taxation of first period labor income matters for wage formation and we show that the welfare can be improved by implementin..

We study Dutch taxpayers’ preferences in designing a social welfare system. With help of a choice experiment we ask 2000 respondents to make choices between policy packages, characterized by different levels of income for welfare recipients, of obligations, of sanctions, of earnings and gifts disregards, and of taxes for the average Dutch household. The results show that respondents are in favor of relatively generous benefits and disregards, but also find monitoring and activation very important. Both self-interest and altruism, as well as trust in the government, appear to shape respondents' preferences. Respondents’ preferences line up with their voting behavior.

Income tax and welfare withdrawal together penalise additional work effort by generating effective marginal tax rates (EMTRs) on extra income that are often as high as 75-80%. Flatter rate structures to provide fairer and more efficient returns to work require either lower top welfare payments, higher top tax rates, or reform of the tax mix. Levelling state taxes on land up to the benchmark set by the ACT could raise as much as $27 billion more in revenue each year without reducing investment or growth. With changes to Commonwealth-state grants, this could fund a halving of all welfare withdrawal rates, producing an effective tax cut of 20-30 cents in the dollar for over one million workers ..

The international agreement on a corporate minimum tax is a milestone in global corporate tax arrangements. The minimum tax disturbs the equivalence between otherwise equivalent forms of efficient economic rent taxation: cash-flow tax and allowance for corporate equity. The marginal effective tax rate initially declines as the statutory tax rate rises, reaching zero where the minimum tax is inapplicable, and increases thereafter. This kink occurs at a lower statutory rate under cash-flow taxation. We relax the assumption of full loss offset; provide a routine for computing effective rates under different designs; and discuss policy implications of the minimum tax.

We examine the effect of business model digitalization on competition and how corporate tax savings through digitalization may augment this relationship. Global policymakers express concern that digitalization-related tax savings unfairly benefit the competitive standing of rival firms over their competitors. Using textual analysis techniques to identify firms’ business models, we show that rivals’ adoption of a digital business model leads to negative economic effects on the performance of their non-digitalizing competitors. We estimate that a one standard deviation increase in the share of digitalized rivals in a market reduces a competitor’s market share by 4.6%. Suggesting signific..

We incorporate tax evasion to a demand-led macrodynamic model of capacity utilization and output growth rate. The frequency of tax evaders is endogenously time-varying, driven by imitation-augmented satisficing evolutionary dynamics involving pecuniary and non-pecuniary factors reflecting the distribution of tax morale across taxpayers. Consequently, the microdiversity of tax compliance behavior and the macrodynamics of economic activity are co-evolutionarily coupled. Matching empirical evidence, long-run heterogeneity in tax compliance is a stable evolutionary equilibrium, and the higher the median tax morale, the lower the frequency of tax evaders. Other comparative statics matching empiri..

This article exploits both the crude oil price surge consecutive to the invasion of Ukraine and 2022 fuel excise tax rebates in France as quasi-natural experiments to infer the price sensitivity of fuel demand. Based on granular individual bank account data at the transaction level, we properly disentangle anticipation effects from price effects, and estimate an average price elasticity of -0.31. It varies little with respect to income and location but substantially decreases, in absolute, with respect to fuel spending and is higher for retirees. We evaluate financial and distributional effects of the actual tax policy as well as its impact on CO2 emissions based on counterfactual simulation..

The present paper studies how to encourage longer careers by reducing labor income taxes for older workers. The analysis relies on numerical experiments within a general equilibrium overlapping generations model that is calibrated to an average OECD economy. I find that the policy can delay retirement and increase tax revenue if treatment occurs close to, and before, the preferred retirement age. A non-trivial share of the increased post-treatment labor supply can be explained by the substitution of hours worked from the pre-treatment career to the post-treatment career. Lowering the treatment age only leads to small changes in the aggregate labor supply, but is increasingly costly for the g..

We evaluate the 2017 Tax Cuts and Jobs Act. Combining reduced-form estimates from tax data with a global investment model, we estimate responses, identify parameters, and conduct counterfactuals. Domestic investment of firms with the mean tax change increases 20% versus a no-change baseline. Due to novel foreign incentives, foreign capital of U.S. multinationals rises substantially. These incentives also boost domestic investment, indicating complementarity between domestic and foreign capital. In the model, the long-run effect on domestic capital in general equilibrium is 7% and the tax revenue feedback from growth offsets only 2p.p. of the direct cost of 41% of pre-TCJA corporate revenue.

This paper develops an overlapping generations model that links a public health system to a pay-as-you-go (PAYG) pension system. It relies on two assumptions. First, the health system directly finances curative health spending on the elderly. Second, public pensions partially depend on health status by introducing a component indexed to society's average level of old-age disability. Reducing the average disability rate in the economy then lowers pension benefits as the need to finance long-term care services also drops. We study the effects of introducing such a 'comprehensive' Social Security system on individual decisions, capital accumulation, and welfare. We first show that health invest..

Drawing on primary sources – colonial public finance documents and existing literature – this article examines the financial challenges associated with British and French colonial expansion in Africa. It highlights the important role that revenue extraction through colonial taxation played in establishing and maintaining colonial administrative institutions. We believe that this factor is at the root of postcolonial institutional dualism and, by extension, the weakness of the rule of law in the former colonies. The article concludes that concerns about the rising administrative operating costs of colonial rule influenced and dictated all aspects of colonial policymaking and ins..

Against the backdrop of fiscal transition concomitant to energy transition policies with climate change commitments, revenue from extractive sector needs a recalibration in subnational fiscal space. Extractive tax is the payment due to the government in exchange for the right to extract the mineral substance. Extractive tax has been fixed and paid in multiple tax regimes, sometimes on the measures of ad valorem (value based) or profits or as the unit of the mineral extracted. Using the ARDL methodology, this paper analyses the buoyancy of extractive revenue across the States in India, for the period 1991-92 to 2022-23 and analysed the short run and long run coefficients and their speed of ad..

Formal conceptions of state capacity have mostly focused on indirect measures of state capacity – by, for instance, using the state’s fiscal or extractive capacity as a proxy for its overall capacity. Yet, this input or extractive view of state capacity falls short, especially since cross-country empirical evidence suggests that similar levels of fiscal capacity, measured by tax revenues as a percent-age of GDP, can produce starkly different outputs – both in classic economic terms and in broader terms that citizens would recognize as desirable outcomes, including quality of life, health, security, equality of opportunity, and inter-generational mobility. This paper argues that a centr..

This paper analyzes the relation between economic growth, inequality and redistribution. In a cross-country setting for 25 EU countries over the period between 2007 and 2019, we show that market-income inequality is related to higher growth in the short term. To estimate the impact of redistribution to low-income earners, we introduce a new measure, the so called net benefit share (NBS). Contrary to other findings, we show that this (targeted) redistribution to low-income earners (Q1 NBS) fosters growth in the short term, driven by the consumption and private investment channel. On the other hand, untargeted redistribution towards higher-income earners reduces growth.

During the past two decades, several factors have challenged the stability of national states, adding tensions to the connection between the state and the individual. This paper reviews the literature on state capacity. First, it introduces the origin of the literature and presents the well-established positive correlation between state capacity and economic development. Second, it touches upon fiscal and administrative capacity and conflict. It concludes with a provocative reflection on digital nomads to push the research frontier in analysing the connection between the state and the individual.

This paper estimates the effect of a temporary and large (21 p.p.) value-added tax (VAT) cut along with anti-profiteering measures on food necessities during a period of high inflation in Argentina. Using barcode-level data across more than 3, 000 supermarkets, we find that (1) absent the anti-profiteering measures, the pass-through of the temporary VAT cut to prices was asymmetric: prices responded less to the VAT cut than its repeal resulting in prices that were higher than their pre-VAT cut levels; (2) imposing anti-profiteering measures, such as setting a ceiling on price increases, led to symmetric pass-through rates. Using a household welfare model, we show that the VAT cut resulted in..

The Passive Income and Financial Intermediary Taxation Act (PIFITA) has been passed by the Philippine Congress to the Senate and is currently awaiting ratification. However, there currently are no estimates of the impact of passage of the bill into law on the Philippine economy. This paper attempts to do this by gauging its impact on investment through the changes in the user cost of capital. The results of regression analysis confirms that a reduction of various taxes on passive income lowers the user cost of capital, which stimulates investment.

How do property taxes affect house prices, homeownership, and welfare? I focus on Italy, a country with high homeownership, an outdated property tax system, and failed reform attempts. As in many other countries, owner-occupied houses are exempt from property taxes in Italy. Additionally, property taxes are calculated using outdated cadastral values. I show that using cadastral values creates a regressive property tax since cadastral values are relatively lower for more expensive housing units. I develop a life-cycle model with endogenous homeownership to assess the effects of reforming the current system. My findings show that removing the owner-occupied exemption and adjusting cadastral va..

In this paper, we examine the optimal mixed taxation of polluting goods and subsidies for self-protection under nonlinear income tax. The novel contribution of this paper is that we take into account disaster risk, the probability of which is determined by the total amount of polluting goods consumed by all individuals. We derive the properties of optimal allocations in the first-best and second-best scenarios, and the tax wedges. Additionally, we obtain the optimal tax scheme in cases in which the government cannot observe each individual's consumption of polluting goods. The optimal tax rate on polluting goods includes the Pigouvian term and the screening term under asymmetric information,..

Japan has a unique program called Furusato Nozei (tax payments to hometowns), which allows people to donate a portion of their taxes to their favorite municipalities in return for a gift. The program also provides a measure (called one-stop special measure) that allows donors to receive a tax deduction without filing a final tax return if they donate to five or fewer municipalities. This study verifies how this "limit constraint" measure, which sets a limit on the number of municipalities, affects donors' choices using the results of an original questionnaire survey on the use of the Furusato Nozei program in 2022. Clarifying the characteristics of donors by estimating a usage probability mo..

Chile implemented large pension withdrawals during the Covid pandemic. Afterwards, Chile increased non-contributory benefits in a quasi-universal scheme. Simulating future pensions, I show that the average loss in contributory pension income is 27.9%, with losses of 23.9% and 31.4% for men and women, respectively. After accounting for public transfers, the average loss in total pension income is just 6.2%, with losses of 7.5% and 5.2% for men and women, respectively. Current retirees lost just 1.1% of their pension income after accounting for the government transfers. The state may end up covering 92% of the total value of the pension withdrawals through increased transfers.

The EU committed to meet the poverty reduction target set in the European Pillar of Social Rights Action Plan, which entails to reduce the number of children at risk of poverty or social exclusion by 5 million by 2030. The paper assesses the impact of child-contingent cash support in EU-27 in 2019-2022 on child poverty and inequality and sheds light on the role this kind of support plays, or could further play, when it comes to meeting the 2030 child poverty target. We use the microsimulation model EUROMOD to identify child-contingent cash support and find significant variation in average support per child across EU-27, ranging from 3.2% of GDP per capita in Ireland to 12% of GDP per capita ..

Abstract This study examines the allocation of business subsidies introduced due to the COVID-19 pandemic to different types of companies. The results show that most of the supported companies would not have needed the subsidy, as they would have remained profitable also in the absence of it. Furthermore, companies incurring losses before the pandemic (zombie companies) received COVID-19 subsidies more often than other companies. The subsidies also directed more often to companies with productivity lower than the median productivity. The targeting of subsidies to low-productivity companies slows down future productivity development and economic growth, as labor and capital are more likely to..

This paper seeks to theoretically understand the impact of a tax-subsidy system (as implemented in Extended Producer Responsibility) on packaging source reduction, waste generation, and recycling in the presence of economies of scale and quality concerns in the recycling industry. We use a static equilibrium and a non-homothetic technology function to study asymmetric substitution between the virgin and the recycled material. The model displays a trade-off between recycled content and material productivity, and between waste generation and the recycling industry's profitability. A tax-subsidy scheme in the form of an excise charge and a dual subsidy restores the social optimum, providing tha..

Sovereigns issue debt on both domestic and foreign markets and the two debts are uncorrelated in the data. Sovereigns default mostly selectively. We propose a theory to rationalize these observations. A government chooses the optimal combination of two debts to smooth consumption, which is subject to output shock and volatile tax distortions. In equilibrium, it mostly relies on domestic debt to smooth the tax wedge and on foreign debt to smooth the output shock. Issuing either debt is less costly than raising taxes, but it is subject to default risk due to the government’s limited commitment. A quantitative, calibrated model with two shocks and two debts replicates well debt-to-GDP ra..

We conduct a laboratory experiment to study individual decision on donating to a charity in response to changes in the tax rate and income in the presence of matching and two types of rebate subsidies: deterministic and stochastic. Private consumption is taxed, and contributions are subsidized in a way that preserves the relative price of giving across the fundraising mechanisms. We find that tax framing and rebate subsidy elicit less charitable contribution than neutral framing and matching subsidy; the negative effect on donation is smaller for stochastic than deterministic rebate subsidies. Data suggest that charitable giving is a normal good and that donations and private consumption are..

Governments increasingly use changes in tax rules to combat evasion. We develop a general approach to point-identify tax compliance along with supply and demand elasticities; identification requires data on prices and quantities before and after changes in tax enforcement and a demand or supply shifter. We illustrate our approach using data on Airbnb collection agreements, where full enforcement is achieved by shifting the tax burden away from hosts to renters via the platform. We find that taxes are paid on roughly zero to 3.5 percent of Airbnb transactions prior to enforcement.

The provision of health services plays a central role in the promotion of public welfare and maintaining a healthy society. However, inequalities in access to health care persist between countries, regions, and communities, reflecting the complex interplay of many social, economic, and cultural factors. This article aims to explore the complex relationship between tax deductions and the spatial correlation between health demand and private supply. By using an original data set at an unprecedented municipal level and employing a spatial counterfactual empirical strategy, we contribute to the existing literature in two ways. First, we show a strong territorial heterogeneity of health tax expen..