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This article characterizes optimal social security in economies with agents who exhibit loss aversion. Two forms of loss aversion are explored. In the first, workers have a fixed retirement age and are loss averse over private savings. This motivates a more generous social security program. In the second, workers do no private savings but can choose their retirement age, exhibiting loss aversion over the foregone leisure time from delayed retirement. Social security benefits consequently rise steeper with retirement age and an earlier normal retirement age is optimal. In both cases, optimal policy is highly sensitive to the introduction of loss averse preferences. [ABSTRACT FROM AUTHOR]

This paper studies the optimal design of a pension system together with publicly provided individualized financial education. Agents can invest in both a risky and a non-risky asset and can either under- or over-estimate the expected return of the risky asset. We show that, under perfect information on the misperception biases, it is optimal for the government to impose a uniform level of pension contributions equal to the optimal level of investment in the riskless asset and a U-shaped level of mandatory education. Under asymmetric information, we show that the level of education is always distorted upward for agents with important misperception biases (who either under- or over-estimate financial returns), but can be distorted upward or downward for agents with mild misperception biases. Whether we end up in one or the other situation depends on the size of the public and private costs of education as well as on the shape of the distribution of the misperception biases in the economy. [ABSTRACT FROM AUTHOR]

We extend Stiglitz (J Public Econ, 17, 213–240,1982) to a dynamic and stochastic optimal taxation model, while assessing the effects of exogenous wage regulations. We show that when wage regulations are imposed, consumption inequality rises more than when they are removed. The results lead to an important policy implication that in the face of exogenous wage regulations, the social planner who can design optimal tax schedule prefers to widen the consumption inequality. From this perspective, the drive to enhance production efficiency outweighs the motivation for redistribution. A conventional wisdom that full employment commitment and minimum wage legislation should serve as a buffer for the minority may not be taken for granted. In the qualitative analysis, we find that as wage regulations tighten, the lower bound of the marginal tax rate on capital rises. Our quantitative result validates that, showing that the marginal tax rate on capital increases to varying degrees in response to wage requirements of varying tightness. [ABSTRACT FROM AUTHOR]

The complexity of taxes has been widely discussed in the literature and can be defined and measured in various ways depending on one’s perspective. Institutions play a crucial role in shaping the strategic environment and understanding them is crucial in understanding the policy process. When designing taxes, it is vital to consider how institutions influence tax complexity. In this empirical study, we take an institutional approach to examine what extent the institutional quality supports the tax simplification process. Using the system generalised method of moments (system GMM) for a dynamic panel of 88 countries, we show that higher institutional quality seems to be associated with a lower degree of tax complexity, regardless of income levels and legal origins. These findings are robustly consistent across a variety of specifications and institutional measurements. To that end, we make policy recommendations on tax administration. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to determine the tax potential of G20 countries and estimate the tax revenue they could generate. The study evaluates the effectiveness of tax revenue collection for G20 nations from 2008 to 2020 and investigates the relationship between tax collection efficiency and tax evasion. The study also examines the link between tax collection efficiency and a proxy for tax evasion through anti-corruption efforts. Design/methodology/approach: The study assumes that tax collection is a function of gross domestic product (GDP), population, imports and price level. The study uses a stochastic frontier analysis to calculate the efficiency of tax collection. It estimates the loss in total tax collection due to inefficiency by comparing actual and best-practice tax collection. Findings: The findings indicate that anti-corruption measures and technological advancements positively impact tax collection efficiency. Great Britain is identified as the most efficient country in tax collection, whereas Saudi Arabia is the least efficient. Germany has the highest losses in tax collection due to inefficiency, while Australia experiences the lowest losses in tax collection. Originality/value: This study suggests several practical implications. For example, legislators and policymakers should pay more attention to anti-corruption policies. Also, tax agenesis should focus on better understanding variations in tax collection efficiency between countries and how they relate to tax evasion. [ABSTRACT FROM AUTHOR]

Motivated by the debate on how best to use tax as a policy tool to fill the huge development financing gap in African countries on the one hand, and achieve price stability objective on the other hand, this paper examines the role of different tax measures in the predictability of price stability in selected African countries using a GARCH-MIDAS framework. We find that taxes contribute significantly to inflation volatility, albeit with mixed outcomes. While the results show that raising income, profits and capital gains tax for most African countries heightens inflation volatility, except for Madagascar, we also find that overall tax revenue and customs and other import duties tax had no significant impact on inflation volatility in most of the countries. We also record out-of-sample forecast gains in accounting for tax in the prediction of inflation volatility. For policy, the paper underscored the need for country-specific tax policy designs and implementation strategies. These may include to expand the tax net and improve efficiency of tax collection and administration (for countries where a further increase in tax rate could heighten inflation volatility or in addition consider a marginal increase in tax rate if tax is not a key predictor of inflation). The general policy option is to diversify and stabilize non-tax revenue streams for consistent funding of essential public goods and services and developmental initiatives.

This article estimates commuters' scheduling utility function, which comprises the disutility of arriving at work earlier or later than desired (namely, the schedule-delay cost) and the disutility of travel time. The marginal rate of substitution (MRS) between the schedule delay and the travel time is about 0.85, meaning that commuters are willing to accept an extra schedule delay of about 1.2 time units (the reciprocal of 0.85) to reduce their travel time by 1 unit. For most travelers, the slope of the travel-time profile is much smaller than the estimated slope of the indifference curve (MRS). Based on our theoretical framework, where commuters choose a trip timing based on their travel-time profiles, our empirical results imply that commuters tend to arrive around their desired times bearing a small schedule-delay cost. [ABSTRACT FROM AUTHOR]

Consumption is an important source of greenhouse gas emissions. This study extends the footloose capital model to investigate consumption-generated emissions and consumption taxes in the presence of endogenous firm locations and different market sizes. We find that consumption taxes cause firm relocation and carbon leakage. That is, tax increase in one country induces firms to relocate to the other country; meanwhile, emissions decrease in that country but increase in the other country. We also show that when countries decide on their consumption taxes cooperatively to maximize the joint welfare, the optimal taxes are identical across them, regardless of different market sizes. However, under consumption tax competition, the larger country imposes a higher tax than the smaller country. [ABSTRACT FROM AUTHOR]

Economic disruptions generally create winners and losers. The compensation problem consists of designing a reform of the existing income tax system that offsets the welfare losses of the latter by redistributing the gains of the former. We derive a formula for the compensating tax reform and its impact on the government budget when only distortionary tax instruments are available and wages are determined endogenously in general equilibrium. We apply this result to the compensation of robotization in the United States. [ABSTRACT FROM AUTHOR]

Fertility rates are declining in many countries. But are fertility rates inefficiently low? This paper addresses this question by exploring the efficiency properties of equilibria in an overlapping generations setting with endogenous fertility and dynastic parental altruism, using the notion of P‐efficiency proposed by Golosov, Jones and Tertilt (2007). In contrast to Schoonbroodt and Tertilt (2014), who show that any equilibrium for which nonnegativity constraints on intergenerational transfers are binding is A‐inefficient (and, under the assumption that new lives always increase social welfare, also P‐inefficient), I characterize symmetric, P‐efficient allocations as the equilibria arising from different distribution of rights among the agents, and show that many equilibria exhibiting binding constraints on transfers are P‐efficient. To be more precise, except for dynamically inefficient equilibria, there is no need to alter children's rights so as to achieve efficiency. [ABSTRACT FROM AUTHOR]