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In this paper, we consider households' decision of whether to recycle within a theoretical framework that allows for the inclusion of social and moral motivations. The former comes from valuing social approval while the latter comes from valuing self-image. In the context of our theoretical framework, we introduce a unit pricing system and, separately, mandatory recycling and analyze how each affects the equilibrium in terms of whether a society recycles. We show that a unit pricing system enhances the effect of intrinsic motivation (there is crowding in) while mandatory recycling erodes it (there is crowding out) provided that the marginal utility of self-image falls short of the cost of recycling relative to the environmental benefit of living in a society in which everyone recycles. If mandatory recycling is accompanied by an improvement in recycling services that applies to all recyclables and not just the mandated recyclables, crowding out becomes less likely to occur; if the improved services only apply to the mandated recyclables, there is however no effect on the potential for crowding out. Using an international household-level data set, we find support for the hypothesis that mandatory recycling can lead to crowding out while unit pricing does and, to some extent, can relate the potential for crowding out to higher recycling costs.

The poor state of public finances in many countries has led to calls for fiscal consolidation. In practice, implementing concrete consolidation measures appears to meet with public resistance, suggesting that the success of consolidation efforts strongly depends on the popularity of the chosen measures. To identify public attitudes toward fiscal consolidation and alternative consolidation measures, we conducted a survey among 2,000 German citizens. Applying ordered and multinominal logit models, we test theory-based hypotheses about the determinants of individual attitudes toward public debt. We find that, inter alia, personal economic situation, time preferences, fiscal illusion, and trust in politicians exert a significant impact on attitudes toward fiscal consolidation and preferences for alternative consolidation measures.

In light of climate change mitigation efforts, revenues from climate policies are growing, with no consensus yet on how they should be used. Potential efficiency gains from reducing distortionary taxes and the distributional implications of different revenue recycling schemes are currently debated. To account for households heterogeneity and dynamic trade-offs, we study the macroeconomic and welfare performance of different revenue recycling schemes using an Environmental Two-Agent New-Keynesian model, calibrated on the German economy. We find that, in the long run, welfare gains are higher when revenues are used to reduce distortionary taxes on capital, but this comes at the cost of higher inequality: while all households prefer labor income tax reductions to lump-sum transfers, only financially unconstrained households are better off when reducing taxes on capital income. Interestingly, we find that over the transition period relevant to meet short-medium run climate targets, labor income tax cuts are the most efficient and equitable instrument.

Older wealthholders spend down assets much more slowly than predicted by classic life-cycle models. This paper introduces health-dependent utility into a model in which preferences for bequests, expenditures when in need of long-term care (LTC), and ordinary consumption combine with health and longevity uncertainty to explain saving behavior. To sharply identify motives, it develops strategic survey questions (SSQs) that elicit stated preferences. The model is estimated using these SSQs and wealth data from the Vanguard Research Initiative. A robust finding is that the desire to self-insure against long-term-care risk explains a substantial fraction of the wealthholding of older Americans.

Social insurance is often linked to marriage. I model how such linkage affects the marriage market, and exploit Sweden’s elimination of survivors insurance to demonstrate economically important responses along several behavioral margins in this market. Entry into marriage reflects a demand for survivors insurance up to 50 years before expected payout, especially among couples with high husband mortality risks. Further, elimination of survivors insurance induces divorces and intra-household redistribution towards wives in pre-existing marriages. Because survivors insurance subsidizes couples with highly unequal earnings (capacities), its elimination also raises the long-run assortativeness of matching. These findings demonstrate that when social insurance is linked to marriage, marital behavior is an integral component of couples’ strategies to plan for financial security in old age. The magnitude of these marriage market responses influences the optimality of linking social insurance to marriage.

The federal government makes credit for higher education widely available at subsidized prices through its student loan programs. A loan provision that at times has significantly increased the size and volatility of the subsidies is the consolidation option, which allows borrowers to convert floating rate loans to fixed rate loans, often on very favorable terms. The option provides a novel setting in which to study how unsophisticated borrowers respond to financial incentives. We develop a model to evaluate the option's cost to the government, and find that the ex-ante cost of the option ranged from 0.8% to 6.4% of loan principal between 1998 and 2005. Using a sample of 700,000 student loan records, we find that borrowers responded to the time-varying incentives to consolidate although some left sizeable amounts of money on the table; that more indebted borrowers were more likely to optimize; and that there is some evidence of learning over time.

Using the Progresa data from Mexico, we investigate intrahousehold decision making using a variety of outcomes. We exploit both the experimental nature and the (short) panel dimension of the data to measure the impact of exogenous changes in the intrahousehold distribution of resources on household decisions. We test for global pooling of resources within households, which would correspond to the unitary model of household decision making. We also exploit a set of questions about power and the decision making process in the household to investigate aspects of strategic interactions between household members. Our findings confirm previous rejections of income pooling. We also cannot reject that the wife's relative income share is a significant determinant of the wife's decision making power in the household, with a higher share of income associated with more decision making power. (C) 2002 Elsevier Science (USA).

This paper develops a formula for the optimal nonlinear income tax, the terms of which are familiar from the theory of linear income taxation. The development uses the idea of a perturbation of the optimal schedule and is based upon as assumption of differentiability. It is also shown that the introduction of non-differentiability, implying bunching of taxpayers, may be desirable and, in this case, the optimal schedule may be difficult to determine. The analysis can be applied to nonlinear tax reform.

Paid parental leave schemes have been shown to increase women’s employment rates but de-crease their wages in case of extended leave durations. In view of these potential trade-offs, many countries are discussing the optimal design of parental leave policies. We analyze the impact of a major parental leave reform on mothers’ long-term earnings. The 2007 German parental leave re-form replaced a means-tested benefit with a more generous earnings-related benefit that is grant-ed for a shorter period of time. Additionally, a “daddy quota” of two months was introduced. To identify the causal effect of this policy on long-run earnings of mothers, we use a difference-in-difference approach that compares labor market outcomes of mothers who gave birth just before and right after the reform and nets out seasonal effects by including the year before. Using admin-istrative social security data, we confirm previous findings and show that the average duration of employment interruptions increased for high-income mothers. Nevertheless, we find a positive long-run effect on earnings for mothers in this group. This effect cannot be explained by changes in working hours, observed characteristics, changes in employer stability or fertility patterns. De-scriptive evidence suggests that the stronger involvement of fathers, incentivized by the “daddy months”, could have facilitated mothers’ re-entry into the labor market and thereby increased earnings. For mothers with low prior-to-birth earnings, however, we do not find any beneficial labor market effects of this parental leave reform., CEPA Discussion Papers, 16

The time household members in industrialized countries spend on housework and shopping is substantial, amounting on average to about half as much time as is spent on paid employment. Women bear the brunt of this burden, a difference that is driven in part by the gender differential in wages. Efforts to reduce the gender wage gap and alter gendered norms of behavior should reduce the gender bias in household production time and reduce inefficiency in home production. Policymakers should also note the impact of tax policy on housework time and consider ways to reduce the distortions caused by sales and income taxes.

Most structural models for labour supply ignore the possibility of involuntary unemployment which may lead to biased behavioural responses. This may have important policy implications. We estimate a structural model for labour supply without and with involuntary unemployment for the Netherlands, using data for the period 2006-2009. We estimate both models for four groups separately: singles without children, single parents, couples without children and couples with children. We use information on job search behaviour to estimate the determinants of involuntary unemployment. We find that average labour supply elasticities are only slightly lower in the model with involuntary unemployment than in the model without involuntary unemploy- ment. The main reason for this small bias is the relatively small share of individuals who are involuntary unemployed in the period 2006-2009. A simulation of tax-benefit reforms confirms that the upward bias in average labour supply responses is limited in the model without involuntary unemployment. Only for subgroups with a high risk of being involuntary unemployed, such as lower educated individuals and immigrants, we find a relatively large upward bias in labour supply elasticities in the model without involuntary unemployment.

We investigate the characteristics and the default behavior of households who take out complex mortgages. Unlike traditional fixed rate or adjustable rate mortgages, complex mortgages are not fully amortizing and enable households to postpone loan repayment. We find that complex mortgages are used by sophisticated households with high income levels and prime credit scores, in contrast to the low income population targeted by subprime mortgages. Complex mortgage borrowers have significantly higher delinquency rates than traditional mortgage borrowers even after controlling for leverage, payment resets, and other household and loan characteristics. The difference in the delinquency rates between complex and traditional borrowers increases with measures of financial sophistication and leverage, suggesting that complex borrowers are more strategic in their default decisions than traditional borrowers.

Existing research has investigated the effect of early childhood educational interventions on the child’s later-life outcomes. These studies have found limited impact of supplementary programs on children’s cognitive skills, but sustained effects on personality traits. We examine how a positive change in unearned household income affects children’s emotional and behavioral health and personality traits. Our results indicate that there are large beneficial effects of improved household financial wellbeing on children’s emotional and behavioral health and positive personality trait development. Moreover, we find that these effects are most pronounced for children who are lagging behind their peers in these measures before the intervention. Increasing household incomes reduce differences across adolescents with different levels of initial emotional-behavioral symptoms and personality traits. We also examine potential channels through which the increased household income may contribute to these positive changes. Parenting and relationships within the family appear to be an important mechanism. We also find evidence that a sub-sample of the population moves to census tracts with better income levels and educational attainment.

Provided there are positive external benefits attached to the historic character of buildings, owners of properties in designated conservation areas benefit from a reduction in uncertainty regarding the future of their area. At the same time, the restrictions put in place to ensure the preservation of the historic character limit the degree to which properties can be altered and thus impose a cost to their owners. We test a simple theory of the designation process in which we postulate that the level of designation is chosen to comply with interests of local homeowners. The implication of the model is that a) an increase in preferences for historic character should increase the likelihood of a designation, and b) new designations at the margin should not be associated with significant house price capitalization effects. Our empirical results are in line with these predictions.

In this paper, we study the effect of endogenous audit probabilities on reporting behavior in a face‐to‐face compliance situation, such as at customs. In an experimental setting in which underreporting has a higher expected payoff than truthful reporting, we find an increase in compliance of about 80 percent if subjects have reason to believe that their behavior towards an officer influences their endogenous audit probability. Higher compliance is driven by considerations about how their own appearance and performance affect their audit probability, rather than by the social and psychological effects of face‐to‐face contact.

This paper considers a simple model in which government spending is productive and has a complementary relationship with private consumption to study the response of the latter to government spending. We discuss how these two characteristics can yield empirical observations that indicate a positive response of private consumption to government spending. By assuming some plausible parameter settings, we use empirical evidence to demonstrate that these dual aspects of government spending, which are normally treated separately in the literature, are inseparably linked. Moreover, our findings reveal that in addition to the presence of complementarity, productivity---even if minimal---increases the likelihood of generating a positive consumption response. These results suggest that policymakers need to recognize the importance of quality of government spending rather than quantity when stimulating an economy without a decline in consumption.

In the early 2000s, eight Norwegian energy producing municipalities sold up to ten years of future electricity earnings and let two brokers from Terra Securities make investments on their behalf. In the wake of the 2007 credit crash the municipalities lost up to 80 percent of their assets. This paper uses a difference in difference analysis to show that this tightening of the local government budget, and accompanying uncertainty about future economic outcomes, led to a reduction in private consumption of around 2 percent in 2008. I show that the response is driven by households who are the largest recipients of public services - the young and the elderly. The reduction in consumption is a result of households saving more, and not a direct consequence of changes in their disposable income. I also find that households in the affected municipalities rebalance their portfolios to holding a lower share of risky assets. The results are interpreted as households holding back consumption, and reallocating towards safer assets, until uncertainty regarding fiscal outcomes is resolved. På tidlig 2000-tallet gikk åtte norske vannkraftskommuner med på en investeringsplan med to meglere fra Terra Securities. Meglerne administrerte store investeringer for kommunene, og under kredittkrisen i 2007 tapte de opp mot 80 prosent av de investerte beløpene. Disse tapene kom som en overraskelse på både politikerne og den lokale befolkningen. Siden tapene etter norsk lov måtte dekkes innen fire år, var det gjennom 2008 stor usikkerhet rundt hva konsekvensene ville bli for tjenestetilbud, jobber og videre drift i de rammede kommunene. Mot slutten av 2008 fikk de hardest rammede kommunene innvilget ekstrardinære skjønnsmidler for å kunne opprettholde det lovlig pålagte nivået på tjensteytingen. Dette markerte på mange måter slutten på perioden med usikkerhet, siden det ble etablert at staten ville komme kommunene til unnsetning og ikke tillate for store negative konsekvenser av hendelsen. Artikkelen studerer hvordan husholdninger tilpasset sitt konsum under perioden hvor den finansielle framtiden til kommunen var preget av usikkerhet. Fra registerdata aggregert til familienivå benyttes informasjon om inntekt og endringer i fomue til å imputere konsum for husholdninger. Ved å benytte et difference-in-difference oppsett, hvor jeg sammenligner husholdninger i de rammede kommunene med husholdninger fra andre vannkraftskommuner med like finansielle- og populasjonskarakteristikker (basert på KOSTRA-klassifisering), finner jeg at det private konsumet i de hardest rammede kommunene falt med om lag 2 prosent. I de tre kommunene som tapte penger, men enkelt klarte å dekke tapene uten å havne under statlig administrasjon eller be om ekstraordinære skjønnsmidler, er det ingen signifikant effekt på konsumet. Ved å studere kategorier av finansielle eiendeler og inntekt, viser jeg at det er økt sparing, og ikke redusert inntekt, som genererer det reduserte konsumet. Dette er i tråd med tidligere funn av Aaberge, Liu og Zhu (2016) og Giavazzi og McMahon (2012), som studerer lignende hendelser. Funnene har tydelige implikasjoner for økonomisk politikk i perioder med økt usikkerhet og lavt konsum. Dersom konsumet, og dermed den generelle økonomiske aktiviteten, er lav i en nedgangsperiode preget av usikkerhet, bør myndighetene gjøre det de kan for å skape forutsigbarhet og trygghet. Økonomiske stimulansepakker kan derimot være ineffektive om usikkerheten er høy, da disse vil ha mindre gjennomslag i totalkonsum som følge av at konsumtilbøyeligheten er lav.

A l’aide du modèle de microsimulation Ines (Insee-Drees-Cnaf), nous simulons trois réformes du quotient conjugal : une individualisation l’impôt, la réduction à 1,5 part du quotient conjugal en ouvrant la possibilité pour les couples mariés/pacsés d’opter pour une imposition individuelle, enfin le plafonnement du quotient conjugal au même niveau que le quotient familial. L’individualisation conduit au gain fiscal le plus élevé (environ 7 milliards) contre 5 milliards pour le quotient conjugal à 1,5 part et 3 milliards pour le plafonnement du quotient conjugal. Avec l’individualisation, 46% des ménages sont perdants et la perte est inférieure à 1.5% du revenu disponible pour la moitié des perdants ; 60% des perdants se situent dans les 3 derniers déciles de niveau de vie contre 6% dans les trois premiers. Avec un quotient conjugal à 1,5 part, 45% des couples sont perdants (soit environ 5,8 millions) pour une perte médiane de 680 euros, correspondant à 1.3% du revenu disponible ; 64% des perdants se situent dans les 3 derniers déciles. Enfin avec le plafonnement 7% des couples sont perdants (soit environ 895 000) pour une perte moyenne de 3200 euros par an, et une perte médiane de 1800 euros, soit 2.6% du revenu disponible ; 83% des perdants se situent dans les 3 derniers déciles.

Le quotient conjugal exige des couples mariés et pacsés qu’ils déclarent conjointement leurs revenus et leur attribue deux parts fiscales. Ce dispositif soulève des enjeux en termes de justice fiscale, d’efficacité ou encore de choix redistributif qui sont peu discutés dans le débat démocratique. Pourtant il fait l’objet de nombreuses controverses parmi les économistes : il n’est pas adapté aux nouvelles configurations familiales ; il désincite potentiellement à l’activité des femmes mariées ; il n’est pas conforme au principe de capacité contributive des ménages ; enfin il procure un avantage d’autant plus important que les revenus sont élevés. A l’aide du modèle de microsimulation Ines, nous simulons trois réformes : une individualisation de l’impôt, la réduction à 1,5 part du quotient conjugal en ouvrant la possibilité pour les couples mariés/pacsés d’opter pour une imposition individuelle, enfin le plafonnement du quotient conjugal au même niveau que le quotient familial. L’individualisation conduit au gain fiscal le plus élevé (environ 7 milliards) contre 5 milliards pour le quotient conjugal à 1,5 part et 3 milliards pour le plafonnement. Avec l’individualisation, 46% des ménages sont perdants et la perte est inférieure à 1.5% du revenu disponible pour la moitié des perdants ; 60% des perdants se situent dans les 3 derniers déciles contre 6% dans les trois premiers. Avec un quotient conjugal à 1,5 part, 45% des couples sont perdants (soit environ 5,8 millions) pour une perte médiane de 680 euros, correspondant à 1.3% du revenu disponible ; 64% des perdants se situent dans les 3 derniers déciles. Enfin avec le plafonnement 7% des couples sont perdants (soit environ 895 000) pour une perte moyenne de 3200 euros par an, et une perte médiane de 1800 euros, soit 2.6% du revenu disponible ; 83% des perdants se situent dans les 3 derniers déciles.

Almost all theoretical work on how to calculate the marginal deadweight loss has been done for linear taxes and for variations in linear budget constraints. This is quite surprising since most income tax systems are nonlinear, generating nonlinear budget constraints. Instead of developing the proper procedure to calculate the marginal deadweight loss for variations in nonlinear income taxes a common procedure has been to linearize the nonlinear budget constraint and apply methods that are correct for variations in a linear income tax. Such a procedure leads to incorrect results. The main purpose of this paper is to show how to correctly calculate the marginal deadweight loss when the income tax is nonlinear. A second purpose is to evaluate the bias in results that obtains when the traditional linearization procedure is used. We perform calculations based on the 2006 US tax system and find that the relative deadweight loss caused by increasing existing tax rates is large but less than half of Feldstein’s (1999) estimates for the 1994 tax system.

This paper presents new empirical evidence on the effects of retirement benefits on labor force participation decisions. We use administrative data on the census of private sector employees in Austria and variation from mandated discontinuous changes in retirement benefits from the Austrian pension system. We present graphical evidence documenting labor supply responses to the policy discontinuities. Next, we develop nonparametric procedures to estimate labor supply elasticities based on the graphical evidence and mandated financial incentives. We estimate elasticities of 0.12 for men and 0.38 for women. These relatively low elasticities highlight that many retirement decisions are likely to be affected by factors beyond only financial incentives from retirement benefits.

This paper studies the effect of top tax rates on inventors' international mobility since 1977. We put special emphasis on “superstar” inventors, those with the most abundant and most valuable patents. We use panel data on inventors from the United States and European Patent Offices to track inventors' locations over time and combine it with international effective top tax rate data. We construct a detailed set of proxies for inventors' counterfactual incomes in each possible destination country including, among others, measures of patent quality and technological fit with each potential destination. Exploiting the differential impact of changes in the top tax rate on inventors of different qualities, we find that superstar top 1% inventors are significantly affected by top tax rates when deciding where to locate. The elasticity to the net-of-tax rate of the number of domestic superstar inventors is relatively small, around 0.03, while the elasticity of the number of foreign superstar inventors is around 1. Inventors who work in multinational companies are more likely to take advantage of tax differentials. On the other hand, if the company of an inventor has a higher share of its research activity in a given country, the inventor is less sensitive to the tax rate in that country.

Parents often provide generous financial transfers to their adult children, perhaps assisting with college expenses, recognizing major life course events, or cushioning against negative financial shocks. Because resources are limited, a transfer made to one child likely affects transfers made to others in the family. Despite such possibilities, data limitations have led previous authors to focus almost exclusively on a single type of transfer made at a single point in time. Using data from the Health and Retirement Study, we examine the relationships among parental transfers for college and later cash transfers to all children within a family. We find that parents typically spend differentially on the postsecondary schooling of their children but find no evidence that this differential spending is offset by later cash transfers.

Fungibility of money is a central assumption in the theory of consumer choice: any unit of money is substitutable for another. This implies that the composition of income or wealth is irrelevant for consumption. We find that even in a simple, incentivized setup many subjects do not treat money as fungible. When a label is attached to a part of their budget, subjects change consumption according to the label. We first provide suggestive evidence from the field and then use a laboratory experiment to show this result in a tightly controlled environment. In the lab, subjects with lower cognitive abilities are more likely to violate fungibility. The findings lend support to behavioral models of narrow bracketing and mental accounting. One implication of our results is that in-kind benefits distort consumption more strongly than usually assumed. (JEL: C91, C93, D01, H31, I38)

published

We investigate partial insurance and group risk sharing in extended family networks. Our approach is based on decomposing income shocks into group aggregate and idiosyncratic components, allowing us to measure the extent to which each is insured, having accounted for public insurance programs. We apply our framework to extended family networks in the United States by exploiting the unique intergenerational structure of the PSID. We find that over 60% of shocks to household income are potentially insurable within family networks. However, we find little evidence that the extended family provides insurance for such idiosyncratic shocks.

We characterize the optimal linear tax on capital in an Overlapping Generations model with two period lived households facing uninsurable idiosyncratic labor income risk. The Ramsey government internalizes the general equilibrium effects of private precautionary saving on factor prices. For logarithmic utility a complete analytical solution of the Ramsey problem exhibits an optimal aggregate saving rate that is independent of income risk, whereas the optimal time-invariant tax on capital implementing this saving rate is increasing in income risk. The optimal saving rate is constant along the transition and its sign depends on the magnitude of risk and on the Pareto weight of future generations. If the Ramsey tax rate that maximizes steady state utility is positive, then implementing this tax rate permanently induces a Pareto-improving transition even if the initial equilibrium is dynamically efficient. For general Epstein-Zin-Weil utility we show that the optimal steady state saving rate is increasing in income risk if and only if the intertemporal elasticity of substitution is smaller than 1. August 16, 2019

In this paper, we study the short-run effect of salary receipt on mortality among Swedish public sector employees. By using data on variation in paydays across work-places, we completely control for mortality patterns related to, for example, public holidays and other special days or events coinciding with paydays and for general within-month and within-week mortality patterns. We find a dramatic increase in mortality on the day salaries arrive. The increase is especially pronounced for younger workers and for deaths due to activity-related causes such as heart conditions and strokes. Additionally, the effect is entirely driven by an increase in mortality among low income individuals, who are more likely to experience liquidity constraints. All things considered, our results suggest that an increase in general economic activity on salary receipt is an important cause of the excess mortality.

This paper provides empirical evidence of the existence of forward-looking asset-accumulation behavior among disability-insurance applicants, previously examined only in the theoretical literature. Using panel data from the RAND Health and Retirement Study, I show that rejected applicants for Social Security Disability Insurance (SSDI) possess significantly more assets than accepted applicants immediately prior to application and exhibit lower attachment to the labor force. These empirical results are consistent with the theoretical prediction in Diamond and Mirrlees (1978) and Golosov and Tsyvinski (2006) that certain individuals with high unwillingness to work maximize utility by planning in advance for their future disability insurance application. Because the existing empirical literature on disability insurance does not account for this intertemporal channel, it may underestimate the total work-disincentive effect of SSDI.

How does complexity affect people's reaction to tax changes? To answer this question, we conduct an experiment in which subjects work for a piece rate and face taxes. One treatment features a simple tax system, the other a complex one. Subjects' economic incentives are identical across treatments. We introduce the same sequence of additional taxes in both treatments. Subjects in the complex treatment underreact to new taxes; some ignore new taxes entirely. The underreaction is stronger for subjects with lower cognitive ability. Contrary to predictions from models of rational inattention, subjects are equally likely to ignore large or small incentive changes. (JEL D14, H24, H31)

The current Italian income support policies are defective with respect to efficiency and equity. A reform must face five crucial choices: universal vs. categorical policies; transfers vs. subsidies; unconditional vs. means-tested policies; coverage; flat vs. progressive tax rules. Using a microeconometric model and a social welfare methodology, we simulate—under fiscal neutrality and market equilibrium—the effects of 30 policies obtained from three basic types: conditional basic income, unconditional basic income and wage subsidies. The alternative reforms are evaluated according to four different social welfare criterion: the pure utilitarian and three different versions of a Gini-type social welfare function. The pure utilitarian criterion favours reforms based on a wage subsidy or a combination of wage subsidies and transfers. The Gini-type criteria favour unconditional transfers or combinations of wage subsidies with unconditional transfers. Most of the reforms turn out to be preferable to the current system: the choice set available for selecting a “best” reform given different criteria is very large.

We provide an explanation for why estate taxation is surprisingly little used over the world, given the skewness of the estate distribution. Taxing estates implies meddling with intra-family decisions, which may be frown upon by many. At the same time, the concentration of estates means that a low proportion of the population stands to gain a lot by decreasing estate taxation. We provide an analytical model, together with numerical simulations, where agents bequeathing large estates make monetary contributions that are used to play up the salience of the encroachment aspects of estate taxation on family decisions in order to decrease its political support.

Americans work more than Europeans. Using micro data from the U.S. and 17 European countries, we study the contributions from demographic subgroups to these aggregate level differences. We document that women are typically the largest contributors to the discrepancy in work hours. We also document a negative empirical correlation between hours worked and different measures of taxation, driven by men, and a positive correlation between hours worked and divorce rates, driven by women. Motivated by these observations, we develop a life-cycle model with heterogeneous agents, marriage and divorce and use it to study the impact of two mechanisms on labor supply: (i) differences in marriage stability and (ii) differences in tax systems. We calibrate the model to U.S. data and study how labor supply in the U.S. changes as we introduce European tax systems, and as we replace the U.S. divorce and marriage rates with their European equivalents. We find that the divorce and tax mechanisms combined explain 58% of the variation in labor supply between the U.S. and the European countries in our sample.

A benchmark result in the political economy of taxation is that the degree of redistribution is positively linked to income inequality. However, empirical evidence supporting such a relationship turns out to be mixed. This paper shows how these different empirical reactions can be rationalized within a simple model of tax avoidance and costly tax enforcement. By focussing on structure induced equilibria in which taxpayers vote over the size of the income tax and the level of tax enforcement, we show that higher inequality may well decrease the extent of redistribution, depending on two opposing effects: the standard political effect and a negative tax base effect working through increases in the average level of tax avoidance and the share of enforcement expenditures in total tax revenue.

Summary Both cross sectional and panel methods of analysis for Laos confirm that for public education and health services, the poorest quintile groups receive the smallest shares of total provision of these services. Nevertheless, poor groups’ shares of an increase in the level of provision—their marginal shares—are generally higher than these average shares. For primary and lower secondary education and for primary health centers, expanding the overall level of provision delivers a pattern of marginal effects that is significantly more pro-poor than average shares indicate and the degree to which the poor benefit increases with the level of provision.

This paper uses data from the universe of tax returns filed between 2001 and 2010 to test whether parents shift the timing of childbirth around the New Year to gain tax benefits. Filers have an incentive to shift births from early January into late December, through induction or cesarean delivery, because child-related tax benefits are not prorated. We find evidence of a positive, but very small, effect of tax incentives on birth timing. An additional $1,000 of tax benefits increases the probability of a late-December birth by only about 1 percentage point. We argue that the response to tax incentives is small in part because of confusion about eligibility and delays in the issuance of Social Security numbers for newborns, as well as a lack of control over medical procedures on the part of filers with the highest tax values. In contrast to this small behavioral response, we do document a substantial reporting response among self-employed parents facing changes in the Earned Income Tax Credit as a result of a child's birth. We estimate that this reporting response reduces federal revenue by hundreds of millions of dollars per year. (JEL H24, H31, J13, J23)

Imperfect information and inattention to energy costs are important potential motivations for energy efficiency standards and subsidies. We evaluate these motivations in the lightbulb market using a theoretical model and two randomized experiments. We derive welfare effects as functions of reduced-form sufficient statistics capturing economic and psychological parameters, which we estimate using a novel within-subject information disclosure experiment. The main results suggest that moderate subsidies for energy-efficient lightbulbs may increase welfare, but informational and attentional biases alone do not justify a ban on incandescent lightbulbs. Our results and techniques generate broader methodological insights into welfare analysis with misoptimizing consumers. (JEL D12, D83, H21, H31, L67, Q41, Q48) A fundamental assumption in traditional policy analysis is that people’s choices identify their true preferences. In practice, however, many policies are at least partially predicated on the idea that consumers’ choices may not maximize their own welfare. Examples include consumer financial protection, taxes and bans on drugs, alcohol, cigarettes, and unhealthy foods, and subsidies and mandates for energy-efficient products. To evaluate such policies, it is necessary to extend traditional public finance analysis to allow for the possibility of consumer mistakes and to design empirical strategies that identify the necessary economic and psychological parameters. This paper carries this out in the context of energy efficiency policy.

This paper develops a dynamic structural life-cycle model to study how heterogeneous health and medical spending shocks a¤ect the savings behavior of the elderly. Individuals are allowed to respond to health shocks in two ways: they can directly pay for their health care expenses (self-insure) or they can rely on health insurance contracts. There are two possible insurance options, one through formal contracts and another through informal care provided by family. Formal contracts may be a¤ected by asymmetric information problems, whereas informal insurance depends on social ties (cohesion) and on bequeathable wealth. I estimate the model on SHARE data using simulated method of moments for four levels of wealth in a sample of single retired Europeans. Counterfactual experiments show that health, medical spending and health insurance are indeed the main drivers of the slow wealth decumulation in old age. I also fi?nd that social cohesion rises with age, declines with wealth and is higher in Mediterranean countries than in Central European and Scandinavian countries. Finally, high social cohesion appears typically associated with increased life expectancy.

This paper is a comparative and descriptive analysis of reverse mortgage loans originated in the United States and Puerto Rico from 2010 to 2012 and examines whether differences exist between both jurisdictions and the possible reasons for the latter. The study also compares the average profile of a reverse mortgage borrower in the United States and Puerto Rico. The number of new reverse mortgages generated in the United States and in Puerto Rico decreased from 2010 to 2012. However, during that same time period, the interest rate charged in Puerto Rico on reverse mortgages was higher than in the United States. There was also a reduction in the age of the average borrower. The distribution or the uses of the borrowed funds in Puerto Rico is consistent with prior studies performed in the United States.

We test the equivalence of tax-inclusive, tax-exclusive and tax-rebate prices through a series of experiments differing only in their handling of the tax. Subjects receive a cash budget and decide how much to keep and how much to spend on various attractively priced goods. Subjects spend significantly more under tax-exclusive prices whereas total purchases under tax-inclusive and tax-rebate prices are similar. These results persist throughout most of the ten rounds despite feedback and the ability to revise purchases. The asymmetric response to tax liabilities and rebates highlights consumers' ability both to internalize and to willfully ignore hidden price components. (JEL D12, H25, H31)

A jelen cikk első része Benitez-Silva és szerzőtársai [2009] tanulmányát ismerteti, amely azt dokumentálta, hogy mennyire pontatlanul ismerik az amerikai dolgozók a tb-nyugdíjszabályokat. A szerzők e hiányos tudást figyelembe véve modellezték az amerikai dolgozók nyugdíjdöntéseit. E tanulmányt próbálja magyar helyzetre adaptálni a cikk második része. Vázolja bizonyos nyugdíjszabályok hiányos ismeretére vonatkozó korábbi felmérések eredményeit, s további sejtéseket fogalmaz meg. Két keretmodellben írja le, hogy miként hat a nyugdíjszabályok hiányos ismerete az egyéni döntésekre, végül három minimális modellel szemlélteti e hiányok hatását. A Függelék áttekinti a hazai főszabályok állandó változását. Journal of Economic Literature (JEL) kód: H31, J33., Part one of the paper outlines Benitez-Silva, Demiralp and Lius 2009 work on how exactly US workers know the social security rules and how to model the impact of imperfect knowledge on their decisions. Part two applies their approach to the Hungarian situation, presenting previous relevant studies by Csontos, Kornai and Tóth in 1996, Ágoston and Kovács in 2007 and Czibik and Medgyesi in 2007. The impact of imperfect knowledge of the pension rules on individual decisions is modelled in two frameworks, and three special models are discussed. Documented in an appendix are permanent changes in the main rules, which undermine the satisfactory level of their knowledge.

This paper proposes a theoretical framework based on new household economic theories. A dataset from the 2006 China Health and Nutrition Survey (CHNS) is used. Given heterogeneity in major family members' jobs, the effect of non-labor income on household time allocation is discussed under two scenarios: jobs with flexible work hours and jobs with fixed work hours in the market. Based on the nature of the employer the major family member works for, employers can be categorized into four categories: government-owned, family contract, privately-owned, and foreign-funded. Each of the four categories is used for dissecting the data into different sets for analysis by category. The results imply that job heterogeneity is significantly correlated to household time allocation. An increase in non-labor income results in a decrease in the time allocated to housework for all households. However, leisure time is allocated differently among different households due to job heterogeneity. An increase in non-labor income leads to less leisure time for households working for government-owned or foreign-funded enterprises, and more leisure time for households working for family contract or privately-owned enterprises.

Se investiga la posibilidad de recaudar aportaciones volun tarias para el financiamiento de bienes comunes a trav ́es de dos mecanism os: con- fianza y correspondencia fiscal. Ambas hip ́otesis se eval ́ua n emp ́ırica- mente por medio de dise ̃no experimental levantado en tres lo calidades rurales de M ́exico. Los resultados sugieren que la disposic i ́on a con- tribuir aumenta cuando el bien a financiarse es observable y q ue el nivel de confianza fiscal es equivalente entre la autoridad fis cal y el otro agente recaudador, como lo es el mayordomo en las comuni dades rurales mexicanas, siempre y cuando el bien sea observable y tangible.

The paper focuses on tools of tax policy used as an element of a pro-family policy in France and in Germany. The author intends to prove, using France as an example, that properly developed tax system may stimulate the fertility rate rise. Formulated recommendations for Poland are followed by a clue that effectiveness of the tax preferential conditions is high but only when they are an element of a coherent family promoting policy. Taxes used to promote the pro-family policy but separated from other policies are not an effective way to increase in the fertility rate. The paper also includes comparative analysis of statistical data of fiscal duties imposed on incomes of families and incomes of singles. It enabled to divide analyzed countries into groups based on diversified levels of provided aid and to compare relations to the fertility rate. In the final part of the paper the author comments on the proposal of modification of tax reliefs in Poland proposed by the pro-family program of the President of the Republic of Poland in May 2013.

A tanulmány empirikusan elemzi a nyugdíjkorhatár emelésének azonnali foglalkoztatási hatását. Az általános korhatár születési évjáratokhoz és nemekhez kötődő és egyik évről a másikra élesen változó 1997 és 2009 közötti emelkedése teszi lehetővé az oksági kapcsolat hiteles vizsgálatát a különbségek különbsége módszerével. Az eredmények azt mutatják, hogy az előrehozott nyugdíjkorhatár változása jelentős hatást gyakorolt a női foglalkoztatásra: az átlagosan 45 százalékos foglalkoztatási arány mintegy 5-7,4 százalékponttal emelkedett. A korbetöltött nyugdíjazás esetében ilyen hatás nem figyelhető meg. Ennek oka az, hogy a rokkantnyugdíjazás növekedése ellensúlyozta az öregségi nyugdíj igénybevételének csökkenését.* Journal of Economics Literature (JEL) kód: H31, H55, J14, J26., The paper provides empirical evidence of the effect of changing the retirement age on employment. Based on individual data from Hungary, where the retirement age rose in a number of stages between 1997 and 2009, the analysis benefits from substantial variation in pension eligibility over a relatively short time. It takes a difference/indifference approach and is supported by independent variation in the age-based eligibility rule that contributes to causal identification of the effect. Results suggest that the effect of the changes in early retirement age is substantial, amounting to a 5-7.4 percentage point increase in the 45 per cent employment rate of retirement-age women. Changes in the normal retirement age do not seem to have such an employment effect, because they are counteracted by increases in disability pension claims.

A central justification for social insurance and for other policies aimed at retirement savings is that individuals may fail to make adequate provision during their working years. Much research has focused on myopia and other behavioral limitations. Yet little attention has been devoted to how these infirmities, and government policies to rectify them, influence labor supply. This linkage could be extremely important in light of the large pre-existing distortion due to income and consumption taxation and income-based transfer programs. For example, might myopic individuals, as a first approximation, view payroll taxes and other withholding to fund retirement savings as akin to an income tax, while largely ignoring the distant future retirement benefits that they fund? If so, the distortion of labor supply may be many times higher than otherwise, making savings-promotion policies much more costly than appreciated. Or consider what may be the labor supply implications for an individual who is defaulted into higher savings and, as a consequence, sees concomitantly lower take-home pay. This essay offers a preliminary, conceptual exploration of these questions. In most of the cases considered, savings policies do not act purely like a tax despite individuals’ non-optimizing savings behavior, and in some cases labor supply actually is raised, not lowered, in which event policies that boost savings may be significantly more welfare-enhancing than recognized. Accordingly, there is a compelling need for empirical exploration of the interaction between nonoptimal savings behavior and labor supply.

In the United States, charitable contributions can be deducted from taxable income making the price of giving inversely related to the marginal tax rate. The existing literature documents that charitable giving is very responsive to tax subsidies, but often ignores the spillover effects of such policies. On the other hand, a growing body of literature documents that giving to others reduces stress and strengthens the immune system, which results in better health and longer life expectancy. These findings imply that tax subsidies for charitable giving may have positive spillover effects on health. This paper investigates this hypothesis using data from Center on Philanthropy Panel Study (COPPS), the philanthropy module of the Panel Study Income Dynamics (PSID). Understanding the spillover effects of charitable subsidies on health is quite important given the existing literature that links health status to several important economic outcomes. The results show that charitable subsidies have positive spillover effects on health. In particular, the implied cross-price elasticity of health index with respect to giving is - 0.13 . These results are robust to potential endogeneity of income and highlight the positive externalities created by tax subsidies for charitable giving.

Old-age pension reform is on the agenda across the OECD, and a key target is to delay retirement. Most of these countries also have a disability insurance (DI) program accounting for a large share of labor force exits. This paper builds a quantitative life-cycle model with endogenous retirement to study how DI and old-age pension (OA-pension) systems interact with health and wages to determine retirement age, with particular focus on the macroeconomic effects of OA-pension reforms. Individuals face uncertain future health status and wages, and if in bad health they are eligible for DI if they choose to retire before reaching the statutory retirement age. I calibrate the model to the Norwegian economy and explore the effects of raising the statutory retirement age and cutting OA-pension on labor supply and public finances. The main contribution of the paper is that I, in contrast to standard macro pension models, include DI as another endogenous margin of retirement. I show that failure to account for this margin might severely bias the analysis of OA-pension reforms.

Dans cet article, nous démontrons, en utilisant des données de l’Enquête canadienne sur les capacités financières, que le Québec tire de l’arrière par rapport au reste du Canada non seulement en termes de niveau de littératie financière et d’éducation financière, mais aussi en termes d’épargne et de préparation à la retraite. Nous analysons la possibilité que ces différences soient expliquées par des différences socioéconomiques et explorons la possibilité que des spécificités institutionnelles telles que la prépondérance des régimes de retraite d’employeur à prestations déterminées au Québec puisse expliquer ces différences.

Unaccounted for currency in the U.S. is argued to reflect the presence of widespread income tax evasion. This empirical study seeks to identify determinants of the underground economy in the U.S. in the form of federal personal income tax evasion over the period 1970-2008. In this study, we use the most recent data available on personal income tax evasion, data that are derived from the General Currency Ratio Model and measured in the form of the ratio of unreported AGI (adjusted gross income) to reported AGI. Other studies of federal income tax evasion for the U.S. are dated and do not use data this current. It is found that personal income tax evasion was an increasing function of the maximum marginal federal personal income tax rate, the percentage of federal personal income tax returns characterized by itemized deductions, and unpopular military engagements, in this case, the War in Iraq, and a decreasing function of the Tax Reform Act of 1986 (during its first two years of being implemented), the ratio of the tax free interest rate yield on high grade municipals to the interest rate yield on ten year Treasury notes (as a measure of the incentive effect of a better return to tax avoidance, which is legal), and higher audit rates of filed federal income tax returns (as a measure of risk from tax evasion) by IRS personnel.