The Effect of Anticipated Tax Changes on Intertemporal Labor Supply and the Realization of Taxable Income

We use anticipated changes in tax rates associated with changes in family composition to estimate intertemporal labor supply elasticities and elasticities of taxable income with respect to the net-of-tax wage rate. Changes in the ages of children can affect marginal tax rates through provisions of the tax code that are tied to child age and dependent status. We identify behavioral responses to these tax changes by comparing families who experienced a tax rate change to families who had a similar change in dependents but no resulting tax rate change. A primary advantage of our approach is that these changes can be anticipated, allowing us to estimate substitution effects that are not confounded by life-cycle income effects. We estimate an intertemporal elasticity of family labor earnings of 0.75 for families earning between $35,000 and$85,000 in the Survey of Income and Program Participation (SIPP) and find very similar estimates using the IRS-NBER individual tax panel.

Informal Taxation

Informal payments are a frequently overlooked source of local public finance in developing countries. We use microdata from ten countries to establish stylized facts on the magnitude, form, and distributional implications of this "informal taxation." Informal taxation is widespread, particularly in rural areas, with substantial in-kind labor payments. The wealthy pay more, but pay less in percentage terms, and informal taxes are more regressive than formal taxes. Failing to include informal taxation underestimates household tax burdens and revenue decentralization in developing countries. We propose a simple model of information and enforcement constraints that parsimoniously explains the patterns in the data.

Special Interest Groups and the Allocation of Public Funds

A long-standing puzzle in the fiscal federalism literature is the empirical non-equivalence in government spending from grants and other income. I propose a fully rational model in which violations of fungibility arise from dynamic interactions between politicians and interest groups with the ability to raise funds for local government. The predictions of the model are tested by exploiting unique features of windfalls received by states under a settlement with the tobacco industry. Although windfalls are unrestricted, the median state increased spending on tobacco control programs from zero to $2.30 per capita upon receipt of funds. The marginal propensity to spend on such programs is 0.20 from settlement revenue and zero from overall income. States which were not involved in the settlement lawsuits spend less. The findings are consistent with the predictions of the model when political partisanship is introduced: Republican governors spend less and factors which should lead to political convergence increase spending for Republicans and decrease spending for Democrats. These results cannot be explained by existing models in the literature.

Informal Taxation

Informal payments are a frequently overlooked source of local public finance in developing countries. We use microdata from ten countries to establish stylized facts on the magnitude, form, and distributional implications of this "informal taxation." Informal taxation is widespread, particularly in rural areas, with substantial in-kind labor payments. The wealthy pay more, but pay less in percentage terms, and informal taxes are more regressive than formal taxes. Failing to include informal taxation underestimates household tax burdens and revenue decentralization in developing countries. We propose a simple model of information and enforcement constraints that parsimoniously explains the patterns in the data

Mosquitoes: The Long-term Effects of Malaria Eradication in India

We examine the effects of malaria on educational attainment and income by exploiting geographic variation in malaria prevalence in India prior to a nationwide eradication program in the 1950s. We find that the program led to modest increases in income for prime age men. This finding is robust to using very localized sources of geographic variation and to instrumenting for pre-eradication prevalence with climate factors. We do not observe improvements in income for women, suggesting that observed effects are likely driven by increased labor market productivity. We find no evidence of increased educational attainment for men, and mixed evidence for women.

Culture, Context, and the Taste for Redistribution

Is culture an important determinant of preferences for redistribution? To separate culture from the economic and institutional environment ( context ), we relate immigrants\u27 redistributive preferences to the average preference in their birth countries. We find a strong positive relationship that is robust to rich controls for economic factors and cannot easily be explained by selective migration. This effect is as large as that of own household income and appears stronger for those less assimilated into the destination country. Immigrants from high-preference countries are more likely to vote for more pro-redistribution parties. The effect of culture persists strongly into the second generation. (JEL H23, Z13

Tax Morale

There is an apparent disconnect between much of the academic literature on tax compliance and the administration of tax policy. In the benchmark economic model, the key policy parameters affecting tax evasion are the tax rate, the detection probability, and the penalty imposed conditional on the evasion being detected. Meanwhile, tax administrators also tend to place a great deal of emphasis on the importance of improving tax morale, by which they generally mean increasing voluntary compliance with tax laws and creating a social norm of compliance. We will define tax morale broadly to include nonpecuniary motivations for tax compliance as well as factors that fall outside the standard, expected utility framework. Tax morale does indeed appear to be an important component of compliance decisions. We demonstrate that tax morale operates through a variety of underlying mechanisms, drawing on evidence from laboratory studies, natural experiments, and an emerging literature employing randomized field experiments. We consider the implications for tax policy and attempt to understand why recent interventions designed to improve morale, and thereby compliance, have had mixed results to date

Culture, Context, and the Taste for Redistribution

Is culture an important determinant of preferences for redistribution? To separate the effect of culture from the effect of the economic and institutional environment ("context"), we relate immigrants' preferences for redistribution to the average preference in their birth countries, controlling extensively for individual characteristics and country-of-residence fixed effects. We find a strong positive relationship. This cultural effect is larger for non-voters, those with shorter tenure in the country of residence, and those who move to countries with a large number of immigrants from their own birth countries. Immigrants from countries with a higher preference for redistribution are also more likely to vote for a more pro-redistribution political party. The effect of culture persists strongly into the second generation.

Informal Taxation

Informal payments are a frequently overlooked source of local public finance in developing countries. We use microdata from ten countries to establish stylized facts on the magnitude, form, and distributional implications of this "informal taxation." Informal taxation is widespread, particularly in rural areas, with substantial in-kind labor payments. The wealthy pay more, but pay less in percentage terms, and informal taxes are more regressive than formal taxes. Failing to include informal taxation underestimates household tax burdens and revenue decentralization in developing countries. We propose a simple model of information and enforcement constraints that parsimoniously explains the patterns in the data.