Examining the Role of Fairness in High Stakes Allocation Decisions

Recent experimental evidence has led to a debate about the nature of utility functions in which people are concerned about the amount others earn, and what factors heighten or diminish social preference. We explore fairness by examining behavior across three variants of the dictator game. Using data from nearly 200 dictators allocating as much as $100 each, we observe that fairness considerations are very powerful—when subjects could reasonably believe that disproportionately low offers are “fair”, only 8-12 percent of dictators make positive offers. Examining the comparative static results from these allocation decisions, we find that recent theoretical models of inequality do a respectable job of explaining the data patterns.

Pigouvian tax aversion and inequity aversion in the lab

We use an experimental market with externalities to test whether inequality aversion could help explain the popularity of earmarking tax revenues. We find that voter opposition is not fully explained by material self-interest: Results indicate that preferences for fairness influence voting behavior, with greater inequality in tax revenue distribution negatively affecting the acceptability of the tax. In addition to this, we also discover a significant degree of tax-aversion in the votes. Our findings provide greater understanding of the behavioral underpinnings of the positive impact that earmarking has on the acceptability of Pigouvian taxes.Pigouvian taxes, public acceptability, earmarking, fairness, inequity aversion, laboratory experiments

The Endogenous Formation of Coalitions to Provide Public Goods: Theory and Experimental Evidence

This paper examines the endogenous formation of coalitions that provide public goods in which players implement a minimum participation requirement before deciding whether to join. We demonstrate theoretically that payoff-maximizing players will vote to implement efficient participation requirements and these coalitions will form. However, we also demonstrate that if some players are averse to inequality they can cause inefficient outcomes. Inequality-averse players can limit free riding by implementing larger than efficient coalitions or by blocking efficient coalitions from forming. We test the theory with experimental methods and observe individual behavior and coalition formation consistent with a model of inequality-averse players. Key Words:

Taxpayer Information Assistance Services and Tax Compliance Behavior

The traditional "enforcement" paradigm of tax administration views taxpayers as potential criminals, and emphasizes the repression of illegal behavior through frequent audits and stiff penalties. However, an important trend in tax administration policies in recent years is the recognition that this paradigm is incomplete. Instead, a revised "service" paradigm recognizes the role of enforcement, but also emphasizes the role of tax administration as a facilitator and a provider of services to taxpayer-citizens. This research utilizes laboratory experiments to test the effectiveness of such taxpayer service programs in enhancing tax compliance. Our basic experimental setting mimics the naturally occurring environment: subjects earn income, they must choose whether to file a tax return, and they then must choose how much of their net income to report to a tax authority that may audit the subject. To investigate the effects of taxpayer services, we "complicate" these compliance decisions of subjects, and then provide "services" from the "tax administration" that allow subjects to compute more easily their tax liabilities. Our results indicate that uncertainty reduces both the filing and the reporting compliance of an individual. However, we also find that agency-provided information has a positive and significant impact on the tendency of an individual to file a tax return, and also on reporting for individuals who choose to file a return.tax evasion, tax compliance, behavioral economics, experimental economics

Individual and institutional determinants of the male female wage gap among U.S. economics faculty

This paper provides new evidence on the male female wage gap in academia. Using unique data from the economics discipline, we estimate a human-capital based model to explore the nature of wage differentials among male and female economics professors. Results indicate the salary gap varies across systematically across individual and institutional characteristics.discrimination, wages, academia

Investigating Behavioral Responses to Positive Inducements for Filing Tax Returns

A significant amount of non-compliance associated with the personal income tax is due to the taxpayers who are not “in the system,” not having filed a tax return in the recent past or perhaps ever. We use experimental laboratory methods to examine two types of positive incentives for filing tax returns: tax credits and social safety net benefits, both of which are conditional on tax filing. Our experimental design captures the essential features of the voluntary income reporting and tax assessment system used in many countries. Human participants in a controlled laboratory environment earn income through their performance in a task. The participants must then decide whether to file a tax return and, conditional upon filing, how much income to report. Taxes are paid on reported income only. Unreported income of filers may be discovered via a random audit, and the participant must then pay the owed taxes plus a fine based on the unpaid taxes; non-filers are not subject to an audit. Inducements for filing are introduced in several alternative treatments. In one treatment we introduce a social safety net (e.g., unemployment replacement income) that is conditional on past filing behavior. In a second treatment we introduce tax credits that are available either to low income participants or to all income levels, but again only to those who file a tax return. Our results suggest that a tax credit increases filing but only if the credit is targeted to low income earners. The provision of a social safety net via unemployment benefits also has a positive, albeit indirect, impact on participation. Key Words:

The Endogenous Formation of Coalitions to Provide Public Goods: Theory and Experimental Evidence

This paper examines the endogenous formation of coalitions that provide public goods in which players implement a minimum participation requirement before deciding whether to join. We demonstrate theoretically that payoff-maximizing players will vote to implement efficient participation requirements and these coalitions will form. However, we also demonstrate that if some players are averse to inequality they can cause inefficient outcomes. Inequality-averse players can limit free riding by implementing larger than efficient coalitions or by blocking efficient coalitions from forming. We test the theory with experimental methods and observe individual behavior and coalition formation consistent with a model of inequality-averse players.public goods, coalition formation, inequality aversion, participation requirement, experiments

Residential Photovoltaic Systems in Norway: Household Knowledge, Preferences and Willingness to Pay

Solar power or photovoltaic (PV) systems have emerged as a leading low-carbon energy technology worldwide, but the deployment of residential PV systems in Norway has lagged behind other Scandinavian countries. Therefore, the Norwegian market provides an opportunity to gain insights on the demand factors that determine residential PV adoption. This paper presents results from a stated-preference survey designed to elicit household knowledge, preferences and willingness to pay for residential PV systems. Results suggest that meaningful growth in residential PV capacity depends greater knowledge among households, continued advances in technology, clarity with the grid tariff and stronger support systems. A review of recent experiences in the field corroborates the important role of effective regulatory structures and support programs

Residential Photovoltaic Systems in Norway: Household Knowledge, Preferences and Willingness to Pay

Solar power or photovoltaic (PV) systems have emerged as a leading low-carbon energy technology worldwide, but the deployment of residential PV systems in Norway has lagged behind other Scandinavian countries. Therefore, the Norwegian market provides an opportunity to gain insights on the demand factors that determine residential PV adoption. This paper presents results from a stated-preference survey designed to elicit household knowledge, preferences and willingness to pay for residential PV systems. Results suggest that meaningful growth in residential PV capacity depends greater knowledge among households, continued advances in technology, clarity with the grid tariff and stronger support systems. A review of recent experiences in the field corroborates the important role of effective regulatory structures and support programs

Wind Turbines and Coastal Recreation Demand

We examine the impact of coastal wind turbines on coastal tourism and recreation for residents of the northern CAMA counties in North Carolina. A combination of telephone and web survey data are used to assess the impact of coastal wind farms on trip behavior and site choice. Most of the respondents to our telephone survey claim to support offshore wind energy development, and independent survey data suggest that the observed levels of support may be indicative of the broader population in this region. Overall, we find very little impact of coastal wind turbines on aggregate recreational visitation; loss in consumer surplus associated with wide spread wind development in the coastal zone is insignificant at $17 (or about 1.5$55 per household. On average, we find no evidence of aversion to wind farms 4 miles out in the ocean, or for wind farms located in coastal estuaries. For all wind farm scenarios, we find evidence of preference heterogeneity– some respondents find this appealing while others find it aversive. Key Words: Recreation demand, tourism, renewable energy