Tax Evasion and Community Effects in Italy

I propose an analysis of tax evasion in Italy using the data collected by the website evasori.info. This site collects reports by random internet users of the transactions in which they were involved that, lacking any legal receipt, were hidden from the tax authority. I interpret this experiment as a test of the attitude towards tax evasion by the community in which the tax offender operates: less reported episodes are an indication of a more lenient attitude. Since a more lenient attitude of the community is a lower cost of evading taxes, a smaller number of reports must be associated to less tax evasion. I show that the data confirm this claim. I also show that the presence of younger, less educated individuals and the size of the irregular labor force are associated to a more lenient attitude towards tax evasion.Tax Morale, Tax Evasion Reports

Cocaine: The Complementarity Between Legal and Illegal Trade

The smuggling cost of an imported illegal good decreases as the volume of legally imported goods increases. First because more imports are typically associated to an increased number of transporters, which is an increased supply of potential smugglers. Second because, as the number of shipments increases, the individual inspection probability decreases, lowering the risk born by the smugglers and thus their compensation. I test this theory using data on the market for cocaine, finding empirical support: in a panel of countries, an increased volume of imports is robustly associated to a decreased price of cocaine. Legal and illegal trade appear to be complementary.Illegal Trade, Smuggling Cost, Illegal Drugs

Informality: the Doorstep of the Legal System

Many entrepreneurs operate informally because starting and running a business legally is costly. Using a dynamic model of industry equilibrium, I show that these costs associated to the legal system can rationalize the cross country variability of size of the informal economy. The model implies that the business start-up costs matter more than taxes and labor market regulations. Small, less productive, entrepreneurs, facing high entry costs, can only start informally, waiting to become more productive before legalizing. Informality is just the doorstep of the legal system

Reporting Tax Evasion

I study the anonymous tax evasion reports collected by the website evasori.info for Italy. I find that tax morale, measured by the number of reports per unit of irregular activity, is negatively associated with the median reported amount. If the utility of reporting evasion is increasing in the amount of the transaction, then, for a fixed cost of reporting, there exists a threshold value above which tax evasion is reported. Stronger tax morale implies a bigger utility for the individual that reports the transaction and, therefore, a lower threshold value above which tax evasion is reported. The empirical analysis features a regression of the median reported evaded amount per economic activity on tax morale, controlling for province fixed effects, economic activity fixed effects and time dummies. I also propose a simulation exercise to estimate the threshold below which tax evasion is reported and its dependence on tax morale. The simulation also shows that the empirical results are not the byproduct of oversampling of small transactions. I conclude that tax morale makes it more difficult to overlook petty evasion

Epidemics and Policy: the Dismal Trade-offs

I propose a stochastic SIR-Macro model to study the effects of alternative mitigation policies to cope with an epidemic. Lockdowns that force firms to close and that discontinue social activities slow down the progression of the epidemic at the cost of reducing GDP and increasing debt and, on average, decrease mortality. Testing-Tracing-Quarantine policies decrease mortality at a lower cost, but they are effective only if thorough. I find that lockdowns work best in case of a bigger average family size, of a diffused labor market participation and of a bigger average firm size

Epidemics and Policy: The Dismal Trade-off

I propose a stochastic SIR-Macro model to study the effects of alternative policies to cope with an epidemic. Lockdowns that order firms to close and that discontinues social activities slow down the epidemic progression at the cost of reducing GDP and increasing debt and, on average, decrease mortality. Testing strategies that identify and isolate a large number of infected but asymptomatics decrease mortality at a lower cost, but they are effective only if thorough. The more aggressive the pathogen, and the smaller the capacity of the health system, the bigger the gains from both policies. I also find that lockdowns work best in case of bigger average family size, diffused participation to the job market and bigger average workplace size

Cash Thresholds, Cash Expenditure and Tax Evasion

Using data for Italy, I show that cash thresholds that forbid the use of cash for big transactions are effective tools to reduce cash income and cash circulation. Less cash income, in turn, hinders tax evasion. I propose an estimate of the increase in tax revenue implied by the empirically estimated reduction of cash income determined by the thresholds