Arthur Laffer, who was recently awarded the Presidential Medal of Freedom, is famous for sketching an inverted U-shaped diagram of the supposed trade-off between tax rates and tax revenues. The Laffer curve helps to characterize how firms as well as consumers respond to tax changes, and this research uses it to evaluate whether commodity taxes are an effective tool for financing government expenditure. Applying the idea to taxation of distilled spirits in Pennsylvania, where retail sales only take place through a state-run monopoly, the study shows how firms with market power change their pricing when taxes are cut and what that implies for state tax revenues.
Economists have long speculated about why there are large differences in productivity across both firms and countries. One explanation is that they reflect variation in management practices, which raises the question of whether management training can improve firms’ performance. This research examines the long-run effects of such training, using evidence from the US Productivity Program […]
Globalization gives producers in developing countries the opportunity to serve larger, richer, and more demanding foreign markets. But between these producers and potential consumers in the West sit large buyers, such as Carrefour, H&M, Tesco, and Walmart, with whom business relationships must be negotiated. Due to the large opportunity costs of time and shelf space, […]
In all OECD countries, the central government levies a tax on personal income, with the associated revenues constituting a very significant share of overall government revenue. There is much debate and disagreement among both policy-makers and economists about how incomes should be taxed. This is reflected in important differences in how governments tax personal income […]
More than 19 million US households are enrolled in SNAP, the Supplemental Nutrition Assistance Program, which provides monthly benefits to buy groceries at a wide range of retailers. This research tests how recipients’ spending changes after they join the program – and in particular whether SNAP benefits affect their purchases of food by more than an equivalent cash benefit. The results indicate that a family receiving, say, a $200 monthly SNAP benefit can be expected to increase its monthly expenditure on groceries by $100, far more than the $20 expected rise in food spending from a cash benefit of comparable size.
Many school districts have adopted centralized admissions systems to coordinate student assignments. These systems ask students to rank the schools they would like to attend and then use an algorithm to coordinate placement. These algorithms consider student preferences, eligibility criteria and school capacities. In order to better understand student preferences and the performance of various systems, this study develops a general methodology to analyze the reports on student preferences submitted to school choice systems.
How widespread is tax evasion – and what does that imply for the true extent of inequality? This research explores these questions by analyzing a unique dataset of leaked customer lists from offshore financial institutions matched to administrative wealth records in Scandinavia. The results show that offshore tax evasion is highly concentrated among the rich. The top 0.01% of households by wealth evade about a quarter of the taxes they owe, largely by concealing assets and investment income abroad. Top wealth shares in Denmark, Norway and Sweden increase substantially when adding back these unreported assets, highlighting the need to take account of tax evasion to measure inequality accurately.
Civil servants constitute a key element of state capacity, with the responsibility for raising government revenues, providing public services and implementing reforms. But what happens to their performance when they are appointed to office less on the basis of their talents than on their social connections to powerful patrons? This research examines the costs of patronage through the lens of a historical bureaucracy that spanned the globe: Britain’s Colonial Office. The research combines newly digitized personnel and public finance data from the administration of the British Empire over the period 1854-1966 to show how patronage influenced the promotion and performance of colonial governors.
There is considerable anecdotal evidence of US companies moving from high-tax states to low-tax states, but what do the data reveal about the impact of state taxation on economic activity? This research finds that firms subject to state-level corporate taxation respond to higher corporate tax rates by closing establishments and reducing employment; those subject only to state-level personal income taxation respond similarly to individual income tax rates, though to a lesser extent. Since half of these responses are due to reallocation of business activity to lower-tax states, tax competition across states clearly plays a first-order role in corporate decision-making.
How much does consuming news with a strong political slant influence Americans’ votes in presidential elections? And how strongly do people prefer news sources that are slanted towards their own political preferences? This research provides evidence on the persuasive effects of slanted news and viewers’ tastes for like-minded news by analyzing data on the three big US cable news channels: CNN, Fox News, and MSNBC. The results indicate that these news sources – and Fox News in particular – have the potential for large effects on the outcomes of elections.