Taxation and International Migration of Superstars: Evidence from the European Football Market

This paper analyzes the effects of top earnings tax rates on the international migration of football players in Europe. We construct a panel dataset of top earnings tax rates, football player careers, and club performances in the first leagues of 14 Western European countries since 1985. We identify the effects of top earnings tax rates on migration using a number of tax and institutional changes: (a) the 1995 Bosman ruling which liberalized the European football market, (b) top tax rate reforms within countries, and (c) special tax schemes offering preferential tax rates to immigrant football players. We start by presenting reduced-form graphical evidence showing large and compelling migration responses to country-specific tax reforms and labor market regulation. We then develop a multinomial regression framework to exploit all sources of tax variation simultaneously. Our results show that (i) the overall location responses to the net-of-tax rate is positive and large, with an elasticity of the number of foreign players to the net-of-tax rate around one (and an elasticity of the number of domestic players around .15), (ii) location elasticities are even larger at the top of the ability distribution, but negative at the bottom due to ability sorting effects, and (iii) cross-tax effects of foreign players on domestic players (and vice versa) are negative and quite strong due to displacement effects. Those results can be rationalized in a simple model of migration and taxation with rigid labor demand.

Optimal Unemployment Insurance Over the Business Cycle

This paper characterizes optimal unemployment insurance (UI) over the business cycle using a model of equilibrium unemployment in which jobs are rationed in recession. It offers a simple optimal UI formula that can be applied to a broad class of equilibrium unemployment models. In addition to the usual statistics (risk aversion and micro-elasticity of unemployment with respect to UI), a macro-elasticity appears in the formula to capture the macroeconomic impact of UI on unemployment. In a model with job rationing, the formula implies that optimal UI is countercyclical. This result arises because in recession, jobs are lacking irrespective of job search. Therefore (1) a higher aggregate search effort cannot reduce aggregate unemployment much; and (2) individual search effort creates a negative externality by reducing other jobseekers' probability of finding a job as in a rat race. Hence the social benefits of job search are low. In a calibrated model, optimal UI increases significantly in recession. This quantitative result holds whether the government adjusts the level or duration of benefits; whether it balances its budget each period or uses deficit spending.Unemployment insurance, business cycle, job rationing, matching frictions

Optimal Unemployment Insurance over the Business Cycle

This paper examines how optimal unemployment insurance (UI) responds to the state of the labor market. The theoretical framework is a matching model of the labor market with general production function, wage-setting mechanism, matching function, and preferences. We show that optimal UI is the sum of a conventional Baily-Chetty term, which captures the trade-off between insurance and job-search incentives, and a correction term, which is positive if UI brings labor market tightness closer to its efficient level. The state of the labor market determines whether tightness is inefficiently low or inefficiently high. The response of optimal UI to the state of the labor market therefore depends on the effect of UI on tightness. For instance, if the labor market is slack and tightness is inefficiently low, optimal UI is more generous than the Baily-Chetty level if UI raises tightness and less generous if UI lowers tightness. Depending on the production function and the wage-setting mechanism, UI could raise tightness, for example by alleviating the rat race for jobs, or lower tightness, for example by increasing wages through bargaining. To determine whether UI raises or lowers tightness in practice, we develop an empirical criterion. The criterion involves a comparison of the microelasticity and the macroelasticity of unemployment with respect to UI.

The effect of tax enforcement on tax elasticities: evidence from charitable contributions in France

In the “sufficient statistics” approach, the optimal tax rate is usually expressed as a function of tax elasticities that are often endogenous to other policy instruments available to the tax authority, such as the level of information, enforcement, etc. In this paper we provide evidence that both the magnitude and the anatomy of 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 behaviors. 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 failure to account for the effect of tax enforcement on both the magnitude and the anatomy of the elasticity of the tax base with respect to the net of tax rate can lead to misleading policy conclusions, both for the global optimal tax rate (when all policy instruments are optimized) and the local optimal tax rate (conditional on all othe

Studying consumption patterns using registry data: lessons from Swedish administrative data

This paper measures consumption expenditures using registry data on income and asset holdings in Sweden and illustrates how a registry-based measure can alleviate some critical limitations of traditional survey measures in capturing changes in consumption inequality and consumption responses to shocks. In the construction of our measure, we build on previous work exploiting the identity coming from the household budget constraint between consumption expenditures and income net of savings. We try to improve this measure using more registry information to account for the contribution of both financial and real assets to consumption flows. We demonstrate the power of the registry-based measure to study the relationship between income and consumption inequality, especially at the top of the income distribution. We also exploit the longitudinal dimension to study consumption responses to important life-time events and the different means used to smooth consumption

Le quotient familial a-t-il stimulé la natalité française ?

Dans cette étude, nous exploitons les variations des mesures familiales de la législation de l’impôt sur le revenu afin d’estimer l’impact des incitations financières sur la fécondité à partir de la méthode dite des « expériences naturelles ». Nous utilisons des données annuelles issues du dépouillement exhaustif de l’ensemble des déclarations de revenus par l’administration fiscale depuis 1915. Nous avons exploité deux expériences naturelles, le plafonnement des effets du QF en 1981 et l’introduction de la demi-part supplémentaire au troisième enfant en 1980, qui semblent indiquer que l’impact des politiques d’incitations fiscales sur la fécondité est positif, mais toujours extrêmement faible. Néanmoins, même s’ils demeurent très faibles, ces effets présentent deux caractéristiques remarquables. Ils sont tout d’abord très lents à se diffuser (5 à 10 ans). Ils sont ensuite assez clairement dissymétriques en fonction du rang de naissance et du niveau de revenu : la politique de troisième enfant a une certaine efficacité quoique très restreinte et les très hauts revenus sont légèrement plus sensibles aux incitations fiscales que les hauts revenus.In this article, we try to estimate the impact of financial incentives on fertility using the natural experiment method. The data used in this paper come from annual 1915-1998 income tabulations produced by the French Income Tax system, which has always embedded strong familial measures in order to stimulate fertility. We focused on two particular episodes : the ceiling of the effects of the Quotient familial decided in 1981, and the extension of the incentives towards the third child which took place in 1980. Our estimates tend to prove that fiscal policy has a very small impact on French top revenues’ fertility. But this impact is peculiar in the sense that it is quite clearly asymmetric : the incentives are a little more efficient at the third child’s level, and the elasticity of fertility seems a little stronger for very high revenues

Assessing the welfare effects of unemployment benefits using the regression kink design

I show how, in the tradition of the dynamic labor supply literature, one can identify the moral hazard effects and liquidity effects of unemployment insurance (UI ) using variations along the time profile of unemployment benefits. I use this strategy to investigate the anatomy of labor supply responses to UI. I identify the effect of benefit level and potential duration in the regression kink design using kinks in the schedule of benefits in the US. My results suggest that the response of search effort to UI benefits is driven as much by liquidity effects as by moral hazard effects

The value of registry data for consumption analysis: an application to health shocks

This paper measures consumption expenditures using registry data on income and asset holdings in Sweden. We show how a registry-based measure complements traditional survey measures of consumption and can alleviate some critical limitations. We describe the construction of our measure, which builds on prior work and exploits the identity coming from the household budget constraint between consumption expenditures and income net of savings. We demonstrate the value of the registry-based measure to study consumption responses to shocks, also relative to surveyed consumption. In our application to health shocks, we find that Swedish household experience permanent earning drops, but generous social transfers provide substantial consumption smoothing. We document important heterogeneity in consumption responses and the limited role for private means

Reforming inheritance tax systems: four guiding principles

Inheritance tax systems can play an important role in increasing social equality, yet across the world, these systems often struggle to achieve their intended aims. Étienne Fize, Nicolas Grimprel and Camille Landais outline four key ways in which they can be improved and reformed for modern conditions

The optimal timing of UI benefits: theory and evidencefrom Sweden

This paper provides a simple, yet general framework to analyze the optimal time profile of benefits during the unemployment spell. We derive simple sufficient-statistics formulae capturing the insurance value and incentive costs of unemployment benefits paid at different times during the unemployment spell. Our general approach allows to revisit and evaluate in a transparent way the separate arguments for inclining or declining profiles put forward in the theoretical literature. We then estimate our sufficient statistics using administrative data on unemployment, income and wealth in Sweden. First, we exploit duration-dependent kinks in the replacement rate and find that the moral hazard cost of benefits is larger when paid earlier in the spell. Second, we find that the drop in consumption determining the insurance value of benefits is large from the start of the spell, but further increases throughout the spell. On average, savings and credit play a limited role in smoothing consumption. Our evidence therefore indicates that the recent change from a flat to a declining benefit profile in Sweden has decreased welfare. In fact, the local welfare gains push towards an increasing rather than decreasing benefit profile over the spell