Empirical Evidence on the Effects of Marginal Tax Rates on Income – The German Case

In 1990 the German personal income tax schedule underwent a major change. We interpret this reform as a ‘natural experiment´ and use a panel of individual income tax returns to analyze the response of income to changes in the individual tax rates. Our results suggest an average elasticity of taxable income with respect to the net-of-tax rate of around 0.4. Due to the detailed information the panel provides, we are not only able to distinguish between different levels of income but also between different types of income. We found very low elasticity estimates in the case of regular employment income, but values of up to 1.0 for business income and for high-income households.

Aid Allocation through Various Official and Private Channels: Need, Merit and Self-Interest as Motives of German Donors

Previous literature largely ignores the heterogeneity of aid channels used by each single donor country. We estimate Tobit models to assess the relative importance of recipient need, recipient merit and self-interest of donors for various channels of official and private German aid across a large sample of recipient countries in 2005-2007. Our findings strongly underscore the need for a disaggregated analysis of aid allocation. Aid channels differ significantly in the extent to which need and merit are taken into account. Yet, the German case does not reveal unambiguously superior aid channels. Better targeted aid through some channels seems to be conditioned on political support by recipient countries in the UN General Assembly. --aid allocation,aid channels,donor motives,Germany,Tobit models

Funding, Competition and the Efficiency of NGOs: An Empirical Analysis of Non-charitable Expenditure of US NGOs Engaged in Foreign Aid

We assess the determinants of the wide variation in the efficiency of foreign aid activities across US-based non-governmental organizations (NGOs). In particular, we analyze whether non-charitable expenditures for administration, management and fundraising depend on the intensity of competition among NGOs and on the degree to which they are refinanced by governments. We control for NGO heterogeneity in various dimensions as well as major characteristics of recipient countries. We find that fiercer competition is associated with more efficient foreign aid activities of NGOs, rather than leading to excessive fundraising. Official funding tends to increase administrative costs. Nevertheless, officially financed NGOs spend relatively more on charitable activities since they are less concerned with collecting private donations through fundraising efforts. --non-governmental organizations,foreign aid,administrative costs,fundraising,United States

The complexity of Boolean surjective general-valued CSPs

Valued constraint satisfaction problems (VCSPs) are discrete optimisation problems with a $(\mathbb{Q}\cup\{\infty\})$-valued objective function given as a sum of fixed-arity functions. In Boolean surjective VCSPs, variables take on labels from $D=\{0,1\}$ and an optimal assignment is required to use both labels from $D$. Examples include the classical global Min-Cut problem in graphs and the Minimum Distance problem studied in coding theory. We establish a dichotomy theorem and thus give a complete complexity classification of Boolean surjective VCSPs with respect to exact solvability. Our work generalises the dichotomy for $\{0,\infty\}$-valued constraint languages (corresponding to surjective decision CSPs) obtained by Creignou and H\'ebrard. For the maximisation problem of $\mathbb{Q}_{\geq 0}$-valued surjective VCSPs, we also establish a dichotomy theorem with respect to approximability. Unlike in the case of Boolean surjective (decision) CSPs, there appears a novel tractable class of languages that is trivial in the non-surjective setting. This newly discovered tractable class has an interesting mathematical structure related to downsets and upsets. Our main contribution is identifying this class and proving that it lies on the borderline of tractability. A crucial part of our proof is a polynomial-time algorithm for enumerating all near-optimal solutions to a generalised Min-Cut problem, which might be of independent interest.Comment: v5: small corrections and improved presentatio

Incorporation and Taxation: Theory and Firm-level Evidence

This paper provides a theory and firm-level evidence on the incorporation decision of entrepreneurs in a model of taxes and corporate governance. The theory explains how the incorporation decision of entrepreneurs is driven by taxation (corporate and personal income taxes), corporate transparency, access to external capital and limited liability. We estimate features of this model using a large cross-section of more than 540, 000 firms in European manufacturing. We find that higher personal income tax rates favor incorporation while higher corporate tax rates reduce the probability to incorporate. These findings are robust to the inclusion of other economic and institutional determinants of external financing and choice of organizational form.incorporation, governance, taxes, discrete choice models

Does Conditionality Work? A Test for an Innovative US Aid Scheme

Performance-based aid has been proposed as an alternative to the failed traditional approach whereby donors make aid conditional on the reform promises of recipient countries. However, hardly any empirical evidence exists on whether ex post rewards are effective in inducing reforms. We attempt to fill this gap by investigating whether the Millennium Challenge Corporation (MCC) was successful in promoting better control of corruption. We employ a difference-in-difference-in-differences (DDD) approach, considering different ways of defining the treatment group as well as different time periods during which incentive effects could have materialized. We find evidence of strong anticipation effects immediately after the announcement of the MCC, while increasing uncertainty about the timing and amount of MCC aid appear to weaken the incentive to fight corruption over time.foreign aid, corruption, Millennium Challenge Corporation, MCC effect

Saving Taxes Through Foreign Plant Ownership

This paper analyzes to which extent foreign plant ownership involves lower tax payments than domestic plant ownership. We employ a model of endogenous foreign subsidiary ownership to derive a set of empirically testable hypotheses about the differential taxation of foreign- and domestically-owned subsidiaries. We assess these hypotheses in a data- set of 33,577 European foreign- and domestically-owned manufacturing plants. We identify a significant tax-saving of endogenous foreign owner- ship. On average, foreign owners pay 594 Euros per employee or about 56 percent less than domestic owners of similar subsidiaries. This effect is larger in thinner markets with fewer plants, in markets with a greater relative presence of foreign owners, and for foreign owners of larger plants.company taxation, multinational firms, propensity score matching