Second Partial Flashcards
What are the dimensions according
to which we can measure the presence or absence of gender equality in rights, responsibilities and opportunities between men and women?
- Economic Participation and Opportunities
- Educational Attainment
- Health and survival probabilities
- Political empowerment
Glass Ceiling Effect
The gender gap is higher for top wage percentiles (less percentage of women in top wage percentiles)
Why should family members specialize?
If the two spouses produce and consume a market output and a non-market output and one family member is more productive in one sector than in the other and there is no decreasing marginal productivity of the inputs, at least one member will be completely specialized.
Why should specialization be assigned by gender?
Biology
Firm’s behaviour (conventional gender roles)
Labor Market: Two types of jobs (Lommerud et al., 2015)
- Ordinary: remuneration corresponds to the marginal product
– Fast track jobs: to install a worker in a fast-track job, the employer must sink a relation-specific investment. After
investing, the employer receives a share of the workers’ marginal product, while the worker retains the remaining share.
What makes a company install a worker in a fast-track job? (Lommerud et al., 2015)
The employer’s net returns from installing a worker in a fast-track job will depend on the worker’s ability (observable and identically distributed across men and women), and on his or her on-the-job effort
What makes women to be less chosen for fast-track jobs? (Lommerud et al., 2015)
Assuming ability distribution to be the same among men and women, means that firms assume women will supply less effort. As a result, they’ll be assigned ordinary jobs or at least be given higher standards in order to be employed as a fast-track worker.
Discriminatory equilibrium (Lommerud et al., 2015)
Partners in a family know the firms’ beliefs and will share household duties attributing a higher share of them to the partner with lower opportunities on the labour market.
* Firms’ beliefs are fulfilled and discriminatory equilibria emerge.
Why is there gender inequality in political representation?
Female willingness to run as candidates
Party selection of candidates
Voters’ electoral preferences
Electoral rules
Why to reduce gender inequality in
politics?
Equity considerations
Less corrupted
Role models for other women
Impact on policy: mixed evidence
Gender Quotas
- Widespread policy tool to strengthen female political representation
- Doesn’t obey to meritocracy (less efficiency, less qualified individuals)
- However, positive effects on politician quality
- Mixed effects on female empowerment
Results in Italy (Baltrunaite et al., 2014)
Gender quotas –besides strengthening female political empowerment– have positive effects on the quality of the elected politicians, measured by years of schooling or previous occupation
Let the voters choose women (Baltrunaite et al., 2014)
Analysis of a policy bundle: gender quotas on candidate lists and double preference voting conditioned on gender
Law applies to municipalities with more than 5k residents. We use this as the cut-off to the RDD
Study effects on:
- Female political empowerment in targeted elections
- Spillover effect of the policy in higher level elections
Main Findings
- The new policy increases the share of female politicians in municipal councils by 18pp
- The result is mainly driven by the increase in preference votes cast for female candidates, suggesting a salient role of double preference voting in promoting female empowerment in politics
- The estimates suggest the presence of positive spill-over effects on female candidates’ performance in regional elections
Conclusions of the Italian policy changes for elections
The policy had a large and robust impact on the presence of women in municipal councils, promoting their political empowerment
Driving force: preference votes in favor of female candidates cast by electorate
Even soft policy measures, like double preference voting, may spill-over beyond their direct target
What Is a Tax System?
It is a set of rules, regulations, and procedures that:
1. Defines what events or states of the world trigger tax liability (tax bases and rates).
2. Specifies who or what entity must remit that tax and when (remittance rules).
3. Details procedures for ensuring compliance, including information-reporting requirements and
the consequences (including penalties) of not remitting the legal liability (enforcement rules)
Three Aspects of Tax Systems
- Multiple tax instruments—not just rates and bases but also audit strategy, the extent of information reporting…
- Multiple behavioral responses, not just “real” but also avoidance and evasion
- Multiple sources of cost—not just distortion of choices, but also administrative and compliance costs
Why should we care about tax evasion and tax enforcement
- Tax evasion impairs ability to raise revenue
– Rising rates may reduce the size of the pie; - It generates an inefficient allocation of resources
– Set up a bank account in the Cayman island
– Become self-employed
– Move to the informal economy - If there is heterogeneity in tax evasion:
– It limits the ability to share the burden equitably
– It raises fairness issues –across and within income levels - Tax enforcement is motivated by equity reasons and
efficiency costs. - But also tax enforcement is costly
Allingham and Sandmo (1972)
- Possible to show that tax evasion decreases if the detection rate or the penalty rate increase.
- The relationship with the tax rate and the true income is ambiguous
E(U) = (1-p)U(W-OX) + pU(W-OX-π(W-X))
If p < 1/(1+omega) then full evader
Traces of Evasion (Pissarides and Weber, 1989)
They regress food consumption against employee income and self-employment income, and note that the latter attracts a higher coefficient.
They estimate that self-employed people in the United Kingdom on average underreported their income by about one-third.
Tax audit experiment in Denmark (Kleven et al. 2011)
Goals:
* Study the compliance behaviour
* Study the impact of tax policy on compliance behaviour
* Study deterrence effects
Main results
Overall detected evasion is around 2.5% but:
1) Evasion rate for self-reported items is almost 40%
2) Evasion rate for third party reported items is only 0.3%
3) Overall evasion rate is so low because 95% of income is third party reported in Denmark
Results from studies on tax evasion
For third-party reported income, the evasion rate is always extremely small
The evasion rate for self-employment income conditional on third-party reporting is very low
What this tells us is that self-employed people are not per se more inclined to evade (more risk taking or cheaters), but rather the fact that they are self-employed and self-report their income that makes them do it
Overall tax evasion among the self employed is large because of the information environment and not because of, for example, different preferences among those choosing self employment (such as attitudes toward risk and cheating).
Takeaways from evasion graphs
Evasion rates are higher for small percentages of self-reported income (out of total income).
Probability of getting caught evading is higher for higher percentages of self-reported income
Third-party evaded income is always close to the zero line, independent of the fraction of self-reported income
Reasons for peaks in certain points of taxable income
- Evasion: evading to avoid the tax jump
- Real response: change labor supply (working less) to avoid the bigger taxation
- Avoidance: trying to use (‘legal’) loopholes in the taxing system to avoid the tax increase
After the audit, there is a decrease in this peak.
- Evasion: people getting caught evading
- The rest of this peak is then justified by a combination of real response + avoidance
Impacts of audits on subsequent behaviour (Kleven et al. 2011)
Detection probability:
- Audit Probability
- Probability of being detected conditional on being audited
The experience of getting audited makes people report more the next year, especially on self-reporting
- The overall deterrence effect of audits is positive but quite modest.
- The effect of audits on total net income corresponds to about 1% of income.
- The effect is driven entirely by purely self-reported income and constitutes a substantial fraction of selfreported income.
- When the information environment is such that taxpayers are able to cheat, they display substantial underreporting
(see first part of our analysis) and respond to increased enforcement by substantially reducing underreporting
Impacts of threat of audits on subsequent behaviour (Kleven et al. 2011)
Letters increase the perceived probability of detection and therefore deter taxpayers from underreporting.
There are not important cross-effects between the two treatments (audit and threat of audit).
Audit threats have a significant positive effect on self-reported income, and the effect of 100% audit threats is significantly larger than the effect of 50% audit threats.
Why does third party reporting work?
1) Accounting and payroll records that are widely used within the firm (records need to report true wages in order to be useful to run a complex business)
2) A single employee can denounce collusion between employer and employees. Likely to happen in a large business
Tax Evasion and Inequality (Alstadsæter, Johannesen and Zucman, 2019)
How big is tax evasion in rich countries and how is it distributed?
An important question for:
- Study of income and wealth inequality
- Tax policy and tax enforcement
Main challenge in the literature: hard to capture evasion at the top. Why?
- Small number of rich individuals sampled
- Hard to detect complex evasion involving intermediaries (private banks, shell corp., etc.)
Random audits are thus not enough
Big breakthrough: Panama Papers
Results coming from the Panama Papers (Mossack Fonseca data)
Sharp rise in probability of tax evasion within the top 1% of wealth
Evaders hide almost half of their wealth
The Panama Papers confirm the sharp gradient in use of tax havens by wealth
Results coming from the Panama Papers (Mossack Fonseca data)
Sharp rise in probability of tax evasion within the top 1% of wealth
Evaders hide almost half of their wealth
The Panama Papers confirm the sharp gradient in use of tax havens by wealth
Amnesty data (offered by Sweden and Norway) show widespread evasion at the top
Main result tax evasion is small overall but high at the top
Main conclusions form the study in class of tax evasion
In rich economies with low self-employment, tax evasion is small on aggregate
But high at the top, strong gradient within top 1%
Role of intermediaries
Collecting more revenue from the wealthy may be possible
Tax morale
Tax morale: non pecuniary motivations for tax compliance and factors that motivate tax compliance which are outside the standard expected utility framework
What are the mechanisms through which tax morale operates?
Intrinsic motivations
Reciprocity: Willingness to pay taxes depends on the individual’s relationship with the state other than direct tax benefit linkages. Taxes are part of a social contract and are paid in exchange of services provided by the state
Peer effects and social influences: The choice to comply may be directly affected by the compliance behaviour of others or, by complying, an individual
wants to signal his behaviour to others
Long-run cultural factors: Related to social norms but focus is on long-term persistent characteristics.
Behaviour of individuals with different background placed in the same environment
Tax compliance may be affected by one’s attitudes toward government and its policies (Cullen et al. 2012)
As turnover elections move voters in partisan counties into and out of alignment with the party of the president, are there changes in tax evasion?
Real-world evidence consistent with taxpayers’ disapproval of government increasing evasion.
Moving into alignment (causally) reduces tax evasion
Childcare policy and impacts (Bjerk and Han 2007)
- Cash benefit b to every household, financed by proportional tax
The household optimal condition becomes:
wM (1 − t) + wF (1 − t) − e − e - η + b > wM (1 − t) + b − e ⇒ wF (1 − t) > η (2.5)
Therefore, since women need now to obtain a higher wage, it will be harder for them to
keep on working. Hence, gender inequality rises with cash benefits.
- In-kind transfer to all households
It provides a fraction s of each household’s required amount of child-care through proportional tax t. Households with childcare will have to pay:
(1 − s) η ⇒ gender equality can go ↑ or ↓ (2.6)
The optimal condition becomes
(1 − t) (wM + wF ) − e − e − (1 − s) η > wM (1 − t) − e − (1 − s) e
(1 − t) wF − se > (1 − s) η (2.7)
and we cannot say a priori whether (2.7) is an easier condition to satisfy wrt the previously stated condition wF > η.
- Cash benefits to dual career households
Unless the benefit is such that no job quitting takes place because the transfer covers all
the required home-care, the optimal condition becomes:
(1 − t) (wM + wF ) − e − e − η + b > 0
(1 − t) wF > η − b (2.8)
and gender inequality can rise or fall, depending on the relation between η and b. For instance, if b > η ⇒ η − b < 0, childcare costs are covered and no job quitting takes place.
- In-kind benefits to dual career households
→ gender inequality decreases unambiguously:
(1 − t) (wM + wF ) − e − e − η (1 − s) > (1 − t) wM − e − e
Both work > Male works
(1 − t) wF / (1 − s) > η (2.9)
where (2.9) is a less strict condition if:
(1− t) / (1 − s) > 1 ⇒ t < s.
Factors that lead to tax evasion
- Tax rates
- Audit probability
- Penalties
- Socio-economic conditions
- Prior audit experiences
