Standard models of fiscal federalism suggest many benefits of decentralization in developing economies, and there has been a recent push toward decentralization around the world. However, developing ...countries presently still have less decentralization, particularly on the revenue side, than both developed countries today and the United States and Europe historically. We consider how the trade-offs associated with fiscal federalism apply in developing countries and discuss reasons for their relatively low levels of decentralization. We also consider additional features relevant to federalism in developing economies, such as the prevalence of nongovernmental organizations and the role of social incentives in policy design.
Is culture an important determinant of preferences for redistribution ? To separate culture from the economic and institutional environment ("context"), we relate immigrants' 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 proredistribution parties. The effect of culture persists strongly into the second generation.
Reducing tax evasion is a priority for many governments. A growing literature argues that verifying taxpayer reports against third-party information is critical for tax collection. However, ...effectiveness can be limited when tax authorities face constraints to credible enforcement and taxpayers make offsetting adjustments on other margins. We exploit a policy intervention in which Ecuadorian firms were notified about detected revenue discrepancies. Most firms simply failed to respond. Firms that responded increased reported revenue, matching the discrepancy amount when provided. However, they also increased reported costs by 96 cents per dollar of revenue adjustment, resulting in minor increases in tax collection.
Tax Morale Luttmer, Erzo F. P.; Singhal, Monica
The Journal of economic perspectives,
10/2014, Letnik:
28, Številka:
4
Journal Article
Recenzirano
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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.
I propose a fully rational model of government contracting that explains differences in local government spending from grants and other income. In this model, violations of fungibility arise from ...dynamic interactions between politicians and interest groups with the ability to raise funds for the 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 legally 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. These results cannot be explained by existing models in the literature.
Two types of social policy instruments — making group behavior public to the individual and making individual behavior public to the group — are used by charities to encourage giving and by ...policymakers to incentivize other prosocial behaviors. However, models of social norms suggest that the effects of such interventions are theoretically ambiguous and may even backfire in low-compliance environments. We examine these questions in the context of a public good game. Exploiting a unique experimental design, we show that initial contributors' giving decisions are sensitive to the behavior of the group while initial non-contributors' decisions are not. In contrast, making own behavior public to the group increases contributions for all group types, even those comprised entirely of initial non-contributors. These findings suggest that publicizing contributions causes individuals to respond to a common understanding of prosocial behavior that is not defined solely by the initial group norm.
We examine the effects of exposure to malaria in early childhood on educational attainment and economic status in adulthood 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 household per capita consumption for prime age men, and the effects for men are larger than those for women in most specifications. We find no evidence of increased educational attainment for men and mixed evidence for women.
Informal Taxation Olken, Benjamin A.; Singhal, Monica
American economic journal. Applied economics,
10/2011, Letnik:
3, Številka:
4
Journal Article
Recenzirano
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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 discuss various explanations for and implications of these observed stylized facts.
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