Tax authorities increasingly make use of third‐party reported consumption expenditures when appraising individual income reports. They may initiate an audit if consumption reports cannot be justified by self‐reported income. This in turn incentivizes tax evaders to avoid third‐party reported consumption goods. I determine the implications of this for the optimal tax structure. A tax on non‐reported goods discourages tax evasion because these goods are disproportionately consumed by tax evaders. A tax on reported goods also discourages tax evasion because it further distorts the evader's consumption bundle. I show that it is desirable to tax third‐party reported goods at a higher (lower) rate than non‐reported goods if the elasticity of substitution between both goods is smaller (larger) than one. I then apply the same logic to third‐party reported wealth – i.e., future consumption goods – which tax authorities also use in their audit policies. Existing evidence on the intertemporal elasticity of substitution suggests that it may be optimal to tax third‐party reported wealth at a positive rate.
{"title":"Income tax evasion and third‐party reported consumption and wealth: implications for the optimal tax structure","authors":"Aart Gerritsen","doi":"10.1111/sjoe.12574","DOIUrl":"https://doi.org/10.1111/sjoe.12574","url":null,"abstract":"Tax authorities increasingly make use of third‐party reported consumption expenditures when appraising individual income reports. They may initiate an audit if consumption reports cannot be justified by self‐reported income. This in turn incentivizes tax evaders to avoid third‐party reported consumption goods. I determine the implications of this for the optimal tax structure. A tax on non‐reported goods discourages tax evasion because these goods are disproportionately consumed by tax evaders. A tax on reported goods also discourages tax evasion because it further distorts the evader's consumption bundle. I show that it is desirable to tax third‐party reported goods at a higher (lower) rate than non‐reported goods if the elasticity of substitution between both goods is smaller (larger) than one. I then apply the same logic to third‐party reported wealth – i.e., future consumption goods – which tax authorities also use in their audit policies. Existing evidence on the intertemporal elasticity of substitution suggests that it may be optimal to tax third‐party reported wealth at a positive rate.","PeriodicalId":47929,"journal":{"name":"Scandinavian Journal of Economics","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2024-09-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142184188","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Thomas Aronsson, Olof Johansson‐Stenman, Ronald Wendner
This paper analyzes optimal redistributive charitable giving in a Mirrleesian framework. The status motive behind charity, the stigma from receiving donations, and transaction costs all work to decrease the optimal marginal subsidies on redistributive charity. Because the existing empirical evidence of these effects (when available) is highly uncertain and context‐dependent, the range of possible outcomes is large, and even includes the possibility that charitable giving should be taxed rather than subsidized. In a natural benchmark case, the optimal tax treatment of charitable giving is consistent with a simple tax credit, whereas pure tax deductions are never part of the optimal policy.
{"title":"Optimal redistributive charity","authors":"Thomas Aronsson, Olof Johansson‐Stenman, Ronald Wendner","doi":"10.1111/sjoe.12573","DOIUrl":"https://doi.org/10.1111/sjoe.12573","url":null,"abstract":"This paper analyzes optimal redistributive charitable giving in a Mirrleesian framework. The status motive behind charity, the stigma from receiving donations, and transaction costs all work to decrease the optimal marginal subsidies on redistributive charity. Because the existing empirical evidence of these effects (when available) is highly uncertain and context‐dependent, the range of possible outcomes is large, and even includes the possibility that charitable giving should be taxed rather than subsidized. In a natural benchmark case, the optimal tax treatment of charitable giving is consistent with a simple tax credit, whereas pure tax deductions are never part of the optimal policy.","PeriodicalId":47929,"journal":{"name":"Scandinavian Journal of Economics","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2024-07-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141868495","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Paris Agreement encourages developed countries to lead in reducing emissions. Using a model of national emissions, I examine whether leadership improves global welfare. The results suggest that leadership reduces global emissions when the leader's abatement generates cost‐reducing spillover effects or conveys private information about abatement costs. With spillover effects, the leader abates more to incentivize a greater reduction of emissions by followers. Under private information, the leader abates more to signal the abatement cost. If it has to choose between transparency and no transparency, the leader commits to transparency despite this being inefficient. Besides, I find sequential abatement stable against unilateral deviation.
{"title":"Does leadership promote a cleaner climate?","authors":"Torben Mideksa","doi":"10.1111/sjoe.12572","DOIUrl":"https://doi.org/10.1111/sjoe.12572","url":null,"abstract":"The Paris Agreement encourages developed countries to lead in reducing emissions. Using a model of national emissions, I examine whether leadership improves global welfare. The results suggest that leadership reduces global emissions when the leader's abatement generates cost‐reducing spillover effects or conveys private information about abatement costs. With spillover effects, the leader abates more to incentivize a greater reduction of emissions by followers. Under private information, the leader abates more to signal the abatement cost. If it has to choose between transparency and no transparency, the leader commits to transparency despite this being inefficient. Besides, I find sequential abatement stable against unilateral deviation.","PeriodicalId":47929,"journal":{"name":"Scandinavian Journal of Economics","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2024-07-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141785099","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The optimal pricing of goods, especially when they are new and the innovating firm is a monopolist, must proceed without precise knowledge of the demand curve. This paper provides a pricing method with a relative robustness guarantee by maximizing a performance index which amounts to a worst‐case ratio of the obtained payoff to the best possible payoff. Assuming monotonicity and complementarity of demand in price and the unknown demand parameter, the performance index is fully determined by its behavior at the boundary of the parameter space. This allows for an efficient computation of an optimal robust price. In the linear case, which can also be used for nonlinear demand with bounded slope, the method provides a simple closed‐form solution. A comparison with the standard worst‐case payoff criterion reveals substantial improvements in both absolute and relative performance, at only a small cost relative to the maximized expected profit.
{"title":"Monopoly pricing with unknown demand","authors":"Thomas A. Weber","doi":"10.1111/sjoe.12564","DOIUrl":"https://doi.org/10.1111/sjoe.12564","url":null,"abstract":"The optimal pricing of goods, especially when they are new and the innovating firm is a monopolist, must proceed without precise knowledge of the demand curve. This paper provides a pricing method with a relative robustness guarantee by maximizing a performance index which amounts to a worst‐case ratio of the obtained payoff to the best possible payoff. Assuming monotonicity and complementarity of demand in price and the unknown demand parameter, the performance index is fully determined by its behavior at the boundary of the parameter space. This allows for an efficient computation of an optimal robust price. In the linear case, which can also be used for nonlinear demand with bounded slope, the method provides a simple closed‐form solution. A comparison with the standard worst‐case payoff criterion reveals substantial improvements in both absolute and relative performance, at only a small cost relative to the maximized expected profit.","PeriodicalId":47929,"journal":{"name":"Scandinavian Journal of Economics","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2024-05-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141060142","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We examine trends in intergenerational educational mobility throughout the 20th century in Denmark. We demonstrate that major reforms in compulsory schooling substantially increased not only the levels of education but also intergenerational mobility in education for children born in the 1940s through to the 1960s. However, even as college education has expanded significantly for children born in the 1970s and 1980s, educational mobility has been declining. We empirically test different mechanisms that could account for this decline in educational mobility.
{"title":"The making and unmaking of opportunity: educational mobility in 20th‐century Denmark","authors":"Kristian B. Karlson, Rasmus Landersø","doi":"10.1111/sjoe.12567","DOIUrl":"https://doi.org/10.1111/sjoe.12567","url":null,"abstract":"We examine trends in intergenerational educational mobility throughout the 20th century in Denmark. We demonstrate that major reforms in compulsory schooling substantially increased not only the levels of education but also intergenerational mobility in education for children born in the 1940s through to the 1960s. However, even as college education has expanded significantly for children born in the 1970s and 1980s, educational mobility has been declining. We empirically test different mechanisms that could account for this decline in educational mobility.","PeriodicalId":47929,"journal":{"name":"Scandinavian Journal of Economics","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2024-05-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141060177","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We examine optimal linear taxes on normal and excess capital income with heterogeneous rates of return, alongside an optimal nonlinear earnings tax. Households optimize a portfolio containing three types of assets: risk‐free, diversifiable risky, and private investment with idiosyncratic risk and heterogeneous expected returns. We define normal capital income as the risk‐free rate times the size of the portfolio, and excess returns as any deviations from it. In this setting, taxing excess returns is ineffective for redistribution due to a Domar–Musgrave effect and only generates revenue, to be balanced against the cost of revenue uncertainty. Taxing normal returns does serve redistribution, as they reveal information about the investors' types beyond what the earnings tax base reveals.
{"title":"Optimal taxation of normal and excess returns to risky assets","authors":"Robin Boadway, Kevin Spiritus","doi":"10.1111/sjoe.12566","DOIUrl":"https://doi.org/10.1111/sjoe.12566","url":null,"abstract":"We examine optimal linear taxes on normal and excess capital income with heterogeneous rates of return, alongside an optimal nonlinear earnings tax. Households optimize a portfolio containing three types of assets: risk‐free, diversifiable risky, and private investment with idiosyncratic risk and heterogeneous expected returns. We define normal capital income as the risk‐free rate times the size of the portfolio, and excess returns as any deviations from it. In this setting, taxing excess returns is ineffective for redistribution due to a Domar–Musgrave effect and only generates revenue, to be balanced against the cost of revenue uncertainty. Taxing normal returns does serve redistribution, as they reveal information about the investors' types beyond what the earnings tax base reveals.","PeriodicalId":47929,"journal":{"name":"Scandinavian Journal of Economics","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2024-05-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141060143","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Dirk Engelmann, Jana Friedrichsen, Dorothea Kübler
We investigate how fairness in a laboratory experiment framed as a market exchange relates to preferences for fair trade products elicited before and at the end of the experiment. We collected two samples, 10 years apart. In the original sample, fairness in the market experiment measured by the willingness to buy at a higher price when higher wages are paid to the worker correlates both with the choice of a fair trade product and with the willingness to pay a positive fair trade premium. These correlations are not significant in the replication experiment, which indicates at best a weak relationship.
{"title":"Fairness in markets and market experiments: insights from a field‐plus‐lab study and a failed replication","authors":"Dirk Engelmann, Jana Friedrichsen, Dorothea Kübler","doi":"10.1111/sjoe.12565","DOIUrl":"https://doi.org/10.1111/sjoe.12565","url":null,"abstract":"We investigate how fairness in a laboratory experiment framed as a market exchange relates to preferences for fair trade products elicited before and at the end of the experiment. We collected two samples, 10 years apart. In the original sample, fairness in the market experiment measured by the willingness to buy at a higher price when higher wages are paid to the worker correlates both with the choice of a fair trade product and with the willingness to pay a positive fair trade premium. These correlations are not significant in the replication experiment, which indicates at best a weak relationship.","PeriodicalId":47929,"journal":{"name":"Scandinavian Journal of Economics","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2024-05-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140932732","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study the optimal taxation of bequests in a successive‐generation model in which individuals have heterogeneous preferences over their consumption and the net‐of‐tax bequest received by their heir. We show that it is possible to reconcile the views that children should not be penalized by the lack of altruism of their parents, and parents should be free to choose their bequests. The resulting optimal non‐linear inheritance tax scheme collects money and redistributes it through a non‐negative demogrant, and does not tax, and, in some cases, subsidizes bequests lower than that of the poorest altruistic individual.
{"title":"Fair inheritance taxation","authors":"Benoit Decerf, Francois Maniquet","doi":"10.1111/sjoe.12563","DOIUrl":"https://doi.org/10.1111/sjoe.12563","url":null,"abstract":"We study the optimal taxation of bequests in a successive‐generation model in which individuals have heterogeneous preferences over their consumption and the net‐of‐tax bequest received by their heir. We show that it is possible to reconcile the views that children should not be penalized by the lack of altruism of their parents, and parents should be free to choose their bequests. The resulting optimal non‐linear inheritance tax scheme collects money and redistributes it through a non‐negative demogrant, and does not tax, and, in some cases, subsidizes bequests lower than that of the poorest altruistic individual.","PeriodicalId":47929,"journal":{"name":"Scandinavian Journal of Economics","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2024-04-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140842010","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Across nations, large proportions of younger birth cohorts obtain no professional qualifications. Using rich administrative data from Denmark and a semi‐structural dynamic approach, we analyze different policies targeted towards young people who leave grade 9 with a grade point average in the bottom quintile. We find that preparatory courses, offered to students who are unable to commence a qualifying degree, have no positive impact on future labor market outcomes. Further, unobserved heterogeneity is more important for this group than are cognitive skills. Our results show that education is a good option for many, but not for all.
{"title":"The bottom 20 percent: early career paths of youth with low grade point average","authors":"Jorgen Hansen, Nicolai Kristensen","doi":"10.1111/sjoe.12562","DOIUrl":"https://doi.org/10.1111/sjoe.12562","url":null,"abstract":"Across nations, large proportions of younger birth cohorts obtain no professional qualifications. Using rich administrative data from Denmark and a semi‐structural dynamic approach, we analyze different policies targeted towards young people who leave grade 9 with a grade point average in the bottom quintile. We find that preparatory courses, offered to students who are unable to commence a qualifying degree, have no positive impact on future labor market outcomes. Further, unobserved heterogeneity is more important for this group than are cognitive skills. Our results show that education is a good option for many, but not for all.","PeriodicalId":47929,"journal":{"name":"Scandinavian Journal of Economics","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2024-04-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140593843","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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