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Keywords Early childhood; Pretrial detention; Judicial bias; Communal violence Abstract We estimate the causal effects of judges' exposure to communal violence during early childhood on pretrial detention rates by exploiting novel administrative data on judgments and detailed resumes of judicial officers born during 1955--1991. Our key result is that judges exposed to communal violence between ages 0 and 6 years are 16% more prone to deny bail than the average judge, with the impact being stronger for the experience of riots between ages 3 and 6 years. The observed judicial stringency is driven by childhood exposure to riots with a higher duration of state-imposed lockdowns and low riot casualties. Author Affiliation: (a) Paris School of Economics and University of Namur, France (b) Research School of Economics, Australian National University, Australia * Corresponding author at: Postdoc Associate at New York, Univerisity-Abu Dhabi. Article History: Received 14 March 2022; Revised 8 January 2023; Accepted 16 February 2023 (footnote)[white star] We would like to thank Guilhem Cassan, Yan Chen, Mathieu Couttenier, Oliver Vanden Eynde, James Fenske, Kareem Haggag, Namrata Kala, John List, Ameet Morjaria, Thomas Piketty, Herakles Polemarchakis, Dominic Rohner, Marc Sangnier, and Rabee Tourky for their comments and support. We would like to thank participants of the Young Economist Symposium (Princeton), 100 years of Economic Development Conference (Cornell University), Applied Econometrics Conference (Hitotsubashi University), KVS (Leiden University), and seminar participants at the Paris School of Economics and the University of Namur for suggestions and comments. We gratefully acknowledge Sudhir Gupta, Rahil Vora, and Yucheng Lu for their research assistance. We thank Lakshmi Iyer for providing us the dataset from their paper . We are very thankful to John Mitchell Poverty Lab for providing financial support to this project. This paper was written during the time Sutanuka Roy visited the Department of Economics at the University of Chicago. The author thanks the hosts for their support. This work was also supported by the Fonds Wetenschappelijk Onderzoek - Vlaanderen (FWO) and the Fonds de la Recherche Scientifique - FNRS under EOS project O020918F (EOS ID 30784531) Byline: Nitin Kumar Bharti [nitin-kumar.bharti@psemail.eu] (a,*), Sutanuka Roy [sutanuka.roy@anu.edu.au] (b)

Keywords Pension reform; Early retirement age; Savings; Pension wealth; Consumption expenditure Highlights * In this paper, we examine how households adjust their savings and consumption expenditure in response to an anticipated increase in the early retirement age. * We explore the abolishment of women's pension in 1999 in Germany and an Regression Discontinuity Difference-in-Differences (RD-DD) framework using the German Income and Consumption Survey. * We find a negative impact on private savings of 0.6 percentage points that is driven by married households. * Furthermore, we find that the treated households increase their leisure spending while maintaining an unchanged level of disposable income. * Our findings suggest that the treated households absorb the pension wealth shock without increasing their savings. Abstract This paper examines how households adjust their savings and consumption expenditure in response to an anticipated increase in the early retirement age (ERA). We examine the 1999 pension reform in Germany, which increased the ERA for women born after 1951 by at least three years. First, we present suggestive evidence that women update their retirement planning in response to the reform. Using the German Income and Consumption Survey, we find a negative impact on private savings of 0.6 percentage points that is driven by households with married women. We show that households consisting of highly educated women and homeowners are more likely to reduce their savings rates. Furthermore, we find that the treated households increase their leisure spending while maintaining an unchanged level of disposable income. Our findings suggest that the households anticipate experiencing a lifetime income increase and reduce their savings rate to smooth consumption. Author Affiliation: (a) DIW Berlin, Germany (b) ZEW Mannheim, Germany (c) University of Mannheim, IZA, ZEW, Germany * Corresponding authors. Article History: Received 18 December 2020; Revised 13 February 2023; Accepted 16 February 2023 (footnote)[white star] We would like to thank the editor and three anonymous referees for their comments, which greatly improved the paper. We are grateful to Christian Dustmann, Johannes Geyer, Hans-Martin von Gaudecker, Peter Haan, Eckhard Janeba, Michèle Tertilt, Nicolas Ziebarth and participants at seminars in DIW Berlin, University of Mannheim, CReAM, EPSE 2019, EALE 2019 and University of South Florida for their helpful insights and suggestions. The views expressed here are solely those of the authors. The authors acknowledge funding from the Forschungsnetzwerk Alterssicherung of the German Statutory Pension Scheme and the German Federal Ministry of Labor and Social Affairs within the BMAS-FIS network 'InterdisciplinarySocial Policy Research'. Funding by the German Research Foundation (DFG) through CRC TR 224 (Project C01) is also gratefully acknowledged. All errors are our own. Byline: Stefan Etgeton (a), Björn Fischer [bjoern.fischer@zew.de] (b,*), Han Ye [han.ye@uni-mannheim.de] (c,*)

Keywords Rent control; Apartment lottery; Labor income; Employment Highlights * Receiving a rent-controlled contract have negative effects on the labor supply. * Receiving a rent-controlled contract reduces the labor income. * Receiving a rent-controlled contract have negative effects on employment. Abstract Using a unique randomized rental apartment lottery in Stockholm metropolitan statistical area, this paper analyses behavioral effects on individuals receiving a rent-controlled contract in the Swedish rent control program. The result shows that receiving a rent-controlled contract reduces the annual labor income by 13 to 20 percent and employment by 8 to 13 percent. To some extent, these effects can be explained by an increased propensity to enter higher education. Author Affiliation: (a) Institute for Housing and Urban Research, Uppsala University, Uppsala, Sweden (b) Department of Statistics, Uppsala University, Uppsala, Sweden (c) YMSC, Tsinghua University, Beijing, China * Corresponding author. Article History: Received 18 November 2020; Revised 23 February 2023; Accepted 4 March 2023 (footnote)[white star] We thank seminar participants at Uppsala University and at the SNS. Enström Öst acknowledges support from the Swedish Research Council for Health, Working Life and Welfare (grant 2014--00034). The authors declare that they have no relevant or material financial interests that relate to the research in this paper. Byline: Cecilia Enström Öst [cecilia.enstrom_ost@ibf.uu.se] (a,*), Per Johansson [per.johansson@statistics.uu.se] (b,c)

Keywords Dominant minority; Indirect governance; Loyalty; Economic history; China Highlights * Manchusused a cross-ethnic strategy to rule China where Han elites were appointed to handle daily tasks andManchu superiors were assigned for oversight. * Higher governance complexityled to a higher likelihoodof cross-ethnic arrangements. * Cross-ethnic assignments were more frequent in regions where Han elitesaccumulatedmore discretionary power. * Cross-ethnic assignments wereassociated with better local economic development, more efficient policy execution, and enhanced recognition of imperialauthority. Abstract This paper examines how a million Manchus, as a dominant minority, partly relied on a cross-ethnic personnel strategy to rule over 100 million Han Chinese for 267 years. Under this strategy, Han elites were appointed to handle daily administrative issues, on top of whom Manchu superiors were assigned for oversight. We find that more frequent local extreme weather -- a proxy for governance complexity -- led to higher likelihood of such cross-ethnic arrangements. This link is stronger in regions where Han elites accumulated more discretionary power. Moreover, the cross-ethnic strategy was associated with better local economic development, more efficient policy execution, and enhanced recognition of imperial authority. Author Affiliation: (a) School of Economics, Fudan University, Shanghai 200433, China (b) Cheung Kong Graduate School of Business, Beijing, China (c) Cheung Kong Graduate School of Business, Beijing, China (d) World Bank, 1818 H Street, NW, Washington, DC 20433, United States * Corresponding author. Article History: Received 30 September 2021; Revised 20 January 2023; Accepted 10 February 2023 (footnote)[white star] The views of this paper are the authors' own, and do not implicate the World Bank and its member countries. We thank the coeditor, Maria Petrova, and three anonymous referees for valuable comments and guidance. Helpful and much appreciated suggestions were provided by Shiyu Bo, Cong Liu, and Tianyang Xi. We thank Yantong Fang, Zhichen Huang, Yongtao Li, Yaohui Peng, Xuanyi Wang, Lixi Xu, and Qin Yao for their excellent research assistance. The project has benefited from World Bank RSB support. Chen would like to acknowledge the support from the National Natural Science Foundation of China (71933002; 72121002), Zhuoyue Talent Project, Theoretical Economics Peak Program and Legendary Project on Humanities and Social Sciences (XM04221238) at Fudan University. All remaining errors are our own. Byline: Shuo Chen [cs@fudan.edu.cn] (a), Xinyu Fan [xyfan@ckgsb.edu.cn] (b,*), L. Colin Xu [lixinxu@ckgsb.edu.cn] (c), Xun Yan [xyan@worldbank.org] (d)

Keywords Tax evasion; Value-added tax; Income tax credit; Third-party reporting Highlights * Tax credit incentivizes consumers to ask for invoices that complete the VAT paper trail. * Empirical analysis uses VAT tax returns of the universe of VAT payers in Germany. * Counterfactuals are based on non-eligible industries with high levels of noncompliance. * Two thirds of revenue losses in the income tax are recovered by increase in VAT revenue. * Between a quarter and half of the VAT revenue gain is associated to the VAT evasion margin. Abstract This paper analyzes the effects of an income tax credit for hard-to-tax consumer services on evasion of the value-added-tax (VAT). Based on the individual tax files of the universe of VAT payers in Germany, our analysis shows that harnessing incentives for consumers through tax credits fosters firms' compliance with VAT by bringing in an element of third-party reporting at the last VAT stage. Our results point at strong stimulating effects of the introduction of the tax credit on reported sales as well as on the ratio of reported sales to inputs and we find limited price effects. While two thirds of the revenue losses in the income tax are recovered by an increase in VAT revenues, at least a quarter and up to a half of the revenue gain is associated with a response at the VAT evasion margin. The policy thus fosters considerable formalization effects. Author Affiliation: (a) Friedrich-Alexander-Universität Erlangen-Nürnberg, Lange Gasse 20, 90403 Nürnberg, Germany (b) CESifo, Germany * Corresponding author. Article History: Received 8 August 2021; Revised 28 January 2023; Accepted 1 February 2023 (footnote)[white star] The authors gratefully acknowledge the financial support of the German Science Foundation under grant project 'BU-1254/6'. For helpful comments and suggestions, we are grateful to Albrecht Bohne, Lars Feld, Frank Hechtner, Duccio Gamannossi degl'Innocenti, Christos Kotsogiannis, Sarah Necker, Sandip Sukhtankar, three anonymous referees, and the participants of various seminars and conferences including the ZEW Public Finance Conference (2019), the Annual Meeting of the Verein fuer Socialpolitik in Leipzig (2019), the Workshop 'Enforcing Tax Compliance at the Limits of Third Reporting' at Walter Eucken Institut (2019), the TARC Annual Conference (2020), the 7th Conference on 'Shadow economy, tax behaviour and institutions' (2021), and the Economics Research Seminar at the University of Tübingen (2023). For data support, we thank the DESTATIS team of Melanie Heiliger, Anette Erbe, and especially Hannes Fauser. Byline: Thiess Buettner [thiess.buettner@fau.de] (a,b,*), Boryana Madzharova [boryana.madzharova@fau.de] (a,b), Orlando Zaddach [orlando.zaddach@posteo.de] (a)

Keywords Tax enforcement; Tax evasion; Local taxes; Tax progressivity Highlights * I study the impact of stricter tax enforcement on local taxes set by Italian municipalities. * I take advantage of cross-municipality variation in stricter tax enforcement generated by the Ghost Buildings Program. * Stricter tax enforcement raises statutory tax progressivity on both income and property tax rates. * Larger tax collections increase public spending. Abstract In contexts with weak enforcement, the threat of tax evasion may constrain policy makers' power to set tax policies optimally. This paper studies whether stricter tax enforcement affects the tax schedule set by local governments. I take advantage of an Italian policy that generated cross-municipality variation in the scope for tackling income and property tax evasion through stricter tax enforcement. Combining an event-study design with municipality-level panel data on statutory tax rates, I show that stricter tax enforcement tips the balance in favor of higher marginal tax rates for middle and top incomes, while the poor benefit of a lower marginal tax rate. The tax hike is larger in places with higher pre-program inequality and where intrinsic tax compliance attitudes are weaker. As a result of higher tax revenue, municipalities hire more workers and raise public spending. These results suggest that tax enforcement policies have not only the power to foster tax capacity, but also to enhance the ability to pursue redistributive policies. Author Affiliation: University of Lausanne, Department of Economics and Business, Switzerland Article History: Received 22 April 2022; Revised 23 January 2023; Accepted 23 January 2023 (footnote)[white star] I would like to thank the editor, Ricardo Perez-Truglia, for his guidance and three anonymous reviewers for their helpful comments. The paper also benefited from discussions and comments from Mike Brewer, Marius Brülhart, Ben Meiselman, Andreas Mueller, Alari Paulus, Morten Ravn, Emmanuel Saez, Ugo Troiano and participants at TARC Conference (University of Exeter, April 2019), Shadow Economy Conference (University of Trento, July 2019), NTA Conference (Tampa, November 2019), University of Essex (February 2020), IIPF virtual Conference (August 2020), EEA virtual Congress (August 2020), SIEP Conference (September 2021) for providing constructive comments. Thanks also to Franco Maggio and Giovanni Reina from the Internal Revenue Agency (Agenzia delle Entrate) and Pasquale Recano from the Ministry of Interior (Ministero dell' Interno) for data assistance. All errors are mine. Byline: Enrico Rubolino [enrico.rubolino@unil.ch]

Keywords Taxation; Subsidies and revenue; Tax evasion and avoidance; Micro-based behavioral economics; Fiscal policies and behavior of firms Highlights * We sent messages to 56,310 firms that paid $700 million in corporate income taxes. * Messages increase salience of prison sentences and of public disclosure of evasion. * Messages increased tax revenue by $184 million (0.22% of Dominican Republic's GDP). * We intervene with firms of all sizes including the largest firms in the economy. * Nearly $150 million of the $184 million raised come from the largest firms. Abstract This paper uses a natural field experiment to examine the effectiveness of deterrence messages on tax compliance in the Dominican Republic. In collaboration with the tax authority, we sent messages to 56,310 firms that collectively paid $700 million in the year before the experiment. Our field experiment complements a tax enforcement reform in the Dominican Republic a year before our intervention. Sharing information about prison sentences or the public disclosure of evasion arising from the tax enforcement reform increases tax revenue by $184 million (0.22% of GDP). Using a unique sample that covers the entire firm size distribution, we show that the largest firms, that pay 84% of all corporate income taxes and typically have been excluded from this type of intervention, are highly responsive to our information treatments. Author Affiliation: (a) University of Chicago, Chicago, USA (b) University of Chicago Department of Economics, USA (c) University of Texas at Dallas Jindal School of Management, USA (d) Direccion General de Impuestos Internos, Santo Domingo, Dominican Republic (e) Inter-American Development Bank, Washington, USA * Corresponding author at: Associate Professor of Managerial Economics. Jindal School of Management. The University of Texas at Dallas, 800 West Campbell Road, Richardson, TX 75080. Article History: Received 10 January 2022; Revised 31 October 2022; Accepted 2 November 2022 (footnote)[white star] The experiment reported in this paper are registered at the AEA's Social Science Registry under AEARCTR-0004096. A previous version of this paper also included analysis of a separate experiment registered under AEARCTR-0004064 (). (footnote)[white star][white star] We would like to thank Luis Andres, Marcelo Bérgolo, Chris Blattman, Alec Brandon, Fiona Burlig, Leonardo Bursztyn, Miguel Coronado Hunter, Guillermo Cruces, Josh Dean, Dhammika Dharmapala, Steven Durlauf, Julio Elias, Chang-Tai Hsieh, Clement Imbert, Dmitri Koustas, Michael Kremer, Maximiliano Lauletta, Luis Martinez, David Novgorodsky, Nicole Holz, Ricardo Perez-Truglia, Carola Pessino, Marta Ruiz Arranz, Julia Seither, Sid Sharma, Cass Sunstein, Dick Thaler, Rebecca Wolfe, Karen Ye as well as seminar participants at Instituto OMG Republica Dominicana, The University of Texas at Dallas, University of Chicago Harris, University of Chicago Experiments, Universidad del CEMA, the Advances in Field Experiments conference, RIDGE, Behavioral Insights Global, CESifo Workshop on Political Economy, Behavioral Science Summit, MWIEDC, and ZEW Public Finance Conference. The findings, interpretations, and conclusions in this paper are entirely those of the authors and do not represent the views of the Dominican Republic DGII or Inter-American Development Bank. Byline: Justin E. Holz [justinholz@uchicago.edu] (a), John A. List (b), Alejandro Zentner [azentner@utdallas.edu] (c,*), Marvin Cardoza (d), Joaquin E. Zentner [joaquinz@iadb.org] (e)

Keywords Retirement Savings; Private Pensions; Social Security; Unemployment Insurance Abstract In response to unemployment shocks, older workers deplete their 401(k)s, particularly after the waiving of the early withdrawal penalty on unemployment-motivated withdrawals at age 55. This paper shows that unemployment insurance keeps older workers from depleting their 401(k) assets following job losses. Unemployment insurance also incentivizes older unemployed workers to delay claiming their Social Security benefits beyond the earliest age of eligibility, 62. Overall, unemployment insurance enhances the retirement income of the individuals having a history of late-career layoffs by helping them preserve their 401(k) assets, maintain the return on these assets and opt for a higher stream of Social Security benefits. Author Affiliation: Georgia State University, United States Article History: Received 1 September 2020; Revised 3 September 2022; Accepted 7 September 2022 (footnote)[white star] I am profoundly grateful to Thomas A. Mroz for his guidance and unwavering support and to Stephen Shore for his time and patience. I thank Olivia Mitchell, Daniel Prinz, David Sjoquist and Jonathan Smith for their in-depth review. This work also benefited from constructive feedback from Itzik Fadlon, Kris Gerardi, Tal Gross, Damon Jones, Todd Jones, David Love, Nathaniel Pattison, James Poterba and conference participants at the 2021 Conference of the Society of Labor Economists, the 2021 ZEW Conference on Ageing and Financial Markets, the 2021 meeting of the Cherry Blossom Financial Education Institute at the George Washington University, the 2019 Presidential Session of the meetings of the Southern Economic Association and Georgia State Consumer Finance Seminar. All remaining errors are my own. This paper is part of my dissertation research that I conducted at Georgia State University. I acknowledge the influential support of the Alfred P. Sloan Foundation, through the National Bureau of Economic Research (NBER) Pre-Doctoral Fellowship on the Economics of an Aging Workforce. I thank the NBER staff, particularly Elisa Pepe, for the administrative support and flexibility. Byline: Samir Elsadek Mahmoudi [sam.elsadek@gmail.com]

Keywords Infrastructure; Firms; India; Microenterprises; Regression Discontinuity Design Highlights * We study the effects of a rural infrastructure maintenance and improvement scheme. * We find an increase in overall village-level employment and number of microenterprises. * There was a decline in the share of agricultural workers and a corresponding increase in the share of non-agricultural workers. * Wages, number of days worked, and monthly household consumption expenditure increased. * Rural electrification and connectivity were important mechanisms driving the results. Abstract We evaluate the impact of a rural infrastructure development and maintenance scheme, directed towards India's most 'backward' districts. Importantly, these infrastructure grants were spent on maintenance, improvements, and complementary investments to existing infrastructure. Using a Regression Discontinuity Design and multiple data sets covering the entire firm size distribution, as well as household employment surveys, we show evidence on the effectiveness of the program on local economic activity. In treated districts, the policy appears to have increased overall village-level employment, and the number of microenterprises, but there were no changes for formal firms. These increases were likely driven by a decline in the share of agricultural wage workers. At the individual-level, wages and the number of days worked also increased. There is suggestive evidence that both rural electrification and connectivity were important mechanisms driving our results. We find stronger impacts in electricity and road-intensive industries, and in villages that had paved roads and electricity prior to the program. Overall, our paper suggests that improving rural infrastructure conditions can boost economic activity, especially by stimulating microenterprises. Author Affiliation: (a) Johns Hopkins University, School of Advanced International Studies and IZA, United States (b) The World Bank, United States * Corresponding author. Article History: Received 9 May 2021; Revised 27 May 2022; Accepted 2 August 2022 (footnote)[white star] We would like to thank Ama Baafra Abeberese, Sam Asher, Siddharth Hari, Gaurav Khanna, Amit Khandelwal, Solomon Polachek, Martin Rotemberg, David Slichter, Eric Verhoogen, Susan Wolcott, and participants at the Young Economists Symposium (Yale 2017), Northeastern Association of Business, Economics & Technology (Penn State 2017), ACEGD ISI (New Delhi 2018), Eastern Economic Association (Boston 2018), George Mason Schar School of Policy and Government, EPED (Montreal 2018), Ce2 workshop (Warsaw 2019), UNU-WIDER Development Conference (2019), Florida International University, and Georgetown University for helpful comments. This paper subsumes earlier versions, 'Infrastructure Grants and the Performance of Microenterprises,' as well as 'Rural Infrastructure Development and Economic Activity.' All remaining errors are our own. Byline: Ritam Chaurey [rchaurey@jhu.edu] (a,*), Duong Trung Le [dle6@worldbank.org] (b)

Keywords Fiscal decentralization; Public debt; Time-consistent policy; Soft budget constraint Highlights * A dynamic infinite-horizon model of fiscal federation is developed. * Relationships between transfer, debt, and fiscal decentralization are analyzed. * Framework is applied to study decentralization and debt in Spain during 1988-2006. Abstract This paper develops a dynamic infinite-horizon model with two layers of governments to study theoretically and quantitatively how fiscal decentralization affects local and central government debt accumulation and spending. In the model, the central government makes transfers to local governments to offset vertical and horizontal fiscal imbalances. But the anticipation of transfers lowers local governments' expected cost of borrowing and leads to overborrowing ex ante. Absent commitment, the central government over-transfers to reduce local governments' future need to borrow, and in the equilibrium both local and central debts are inefficiently high. Consistent with empirical evidence, when fiscal decentralization widens vertical fiscal imbalances, local governments become more reliant on transfers, and both local and central debts rise. Applied to Spain, the model explains 39 percent of the rise in total government debt when the vertical fiscal imbalances widened during 1988--1996, and 18 percent of the fall in debt when the imbalances narrowed during 1996--2006. Author Affiliation: (a) International Monetary Fund, United States (b) University at Buffalo, United States (c) World Bank and Federal Reserve Bank of Atlanta, United States * Corresponding author at: World Bank, 1818 H Street, NW Washington, DC 20433, United States. Article History: Received 14 January 2021; Revised 30 May 2022; Accepted 2 June 2022 (footnote)[white star] The views expressed in this paper are those of the authors and do not necessarily represent the views of the IMF, its Executive Board, IMF management, the Federal Reserve System, the Federal Reserve Banks, the IBRD/World Bank or its executive directors. Byline: Si Guo [sguo@imf.org] (a), Yun Pei [yunpei@buffalo.edu] (b), Zoe Xie [lxie@worldbank.org] (c,*)

Keywords Imperfect Competition; Pass-through; Marginal Value of Public Funds; Incidence; Sufficient Statistics Highlights * Welfare effects of taxation and other costs under imperfect competition are analyzed. * Formulas for the marginal value of public funds and incidence are provided. * Our framework can be readily extended to encompass firm heterogeneity. Abstract This paper provides a comprehensive framework to study welfare effects of multiple policy interventions and other external changes under imperfect competition with emphasis on specific and ad valorem taxation as a leading case. Specifically, in relation to tax pass-through, we provide 'sufficient statistics' formulas for two welfare measures under a fairly general class of demand, production cost, and market competition. The measures are (i) marginal value of public funds (i.e., the marginal change in consumer and producer surplus relative to an increase in the net cost to the government), and (ii) incidence (i.e., the ratio of a marginal change in consumer surplus to a marginal change in producer surplus). We begin with the case of symmetric firms facing both unit and ad valorem taxes to derive a simple and empirically relevant set of formulas. Then, we provide a substantial generalization of these results to encompass firm heterogeneity by using the idea of tax revenue that is specified as a general function parameterized by a vector of policy instruments including government and non-government interventions and costs other than taxation. Author Affiliation: (a) Graduate School of Management and Graduate School of Economics, Kyoto University, Japan (b) Acalonia Research, and University of Tokyo, Japan * Corresponding author. Article History: Received 15 February 2021; Revised 28 December 2021; Accepted 28 December 2021 (footnote)[white star] We are very grateful to Nathan Hendren for a number of encouraging comments that have greatly contributed to the improvement of the paper as well as to two anonymous referees for insightful suggestions. We also thank Yong Chao, Naoshi Doi, Germain Gaudin, Jonas Häckner, Makoto Hanazono, Chiaki Hara, Masayoshi Hayashi, Mathias Herzing, Hiroaki Ino, Jakub Kastl, Konstantin Kucheryavyy, Laurent Linnemer, Carol McAusland, Babu Nataha, Hikaru Ogawa, Robert Ritz, Tadashi Sekiguchi, Yasuhiro Shirata, and Glen Weyl as well as conference and seminar participants for helpful discussions. An earlier version of the paper was circulated under the title of 'Multi-Dimensional Pass-Through and Welfare Measures under Imperfect Competition.' Adachi and Fabinger acknowledge a Grant-in-Aid for Scientific Research (C) (15K03425; 18K01567; 21K01440) and a Grant-in-Aid for Young Scientists (A) (26705003) from the Japan Society for the Promotion of Science, respectively. Adachi also thanks financial support from the Japan Economic Research Foundation. Any remaining errors are solely ours. Byline: Takanori Adachi [adachi.takanori.8m@kyoto-u.ac.jp] (a,*), Michal Fabinger [fabinger@e.u-tokyo.ac.jp] (b)

Keywords Social Status; Beliefs; Economic Mobility; Economic Achievement; Experiments Abstract This paper shows that social status determines economic achievement through a psychological mechanism. Specifically, social status influences the way individuals form beliefs about their abilities and these beliefs are, in turn, crucial for achievement. A theoretical framework formalizes this mechanism. Data from a cohort study and from two controlled experiments corroborate its existence and quantify its magnitude. This study highlights the role of social status in creating constraints that are internal to the individual and that have the potential to impair economic success. Author Affiliation: Erasmus School of Economics, Erasmus University Rotterdam, the Netherlands Article History: Received 26 August 2020; Revised 30 March 2022; Accepted 4 April 2022 (footnote)[white star] I am indebted to Patricio S. Dalton for guidance and useful comments on this paper. I thank Charles Noussair, Wieland Müller, Ilyana Kuziemko, Jan Stoop, Florian Schuett, Gabriele Camera, Robert Dur, Georg Kirchsteiger, Phillip Külpmann, Cole Williams, and Joaquin Gomez-Minambres for helpful suggestions. I also thank seminar participants at Tilburg University, Chapman University, the University of Arizona, the Swedish Institute for Social Research at Stockholm University, the University of Vienna, and Trinity College Dublin for their feedback. The experiments reported in this study were funded by CentERLab at Tilburg University Byline: Víctor González-Jiménez [victor.gonzalez@ese.eur.nl]

Keywords Electronic invoicing; VAT; Tax compliance; Digitalization Highlights * Following electronic invoicing reform in Peru, firms report higher VAT obligations. * Small firms and sectors with low tax compliance show strongest effects of policy. * Suggests effects of e-invoicing operate through improved monitoring and deterrence. * Some firms exit when e-invoicing requirements are announced; reveals adoption costs. * Complementary reform needed to unlock VAT collection increase to full potential. Abstract This paper examines the impact of switching from paper to electronic invoicing on firm tax compliance and performance using quasi-experimental variation in the roll-out of VAT e-invoicing in Peru. We find that e-invoicing increases reported firm sales, purchases and VAT liabilities by over 5 percent in the first year after adoption. The impact is concentrated among small firms and sectors with higher rates of noncompliance, suggesting that e-invoicing enhances compliance by lowering compliance costs and strengthening deterrence. However, we also find that existing stocks of VAT credits were used to offset the reform's positive effects on VAT collection, suggesting that digital tools such as e-invoicing would need to be complemented by other reforms to improve revenue mobilization. Author Affiliation: The International Monetary Fund, United States à«· Corresponding author. Article History: Received 31 January 2020; Revised 23 July 2021; Accepted 29 March 2022 (footnote)[white star] This paper builds on earlier work published as an IMF working paper. We are deeply indebted to Jillie Chang, Enrique Rojas and Pilar Villena for their advice, help and support, and to SUNAT for providing data. We thank seminar participants at SUNAT, the IDB, and the IMF for helpful comments and discussions. This research study was supported by funding from the Bill and Melinda Gates Foundation. The views expressed herein are those of the authors and should not be attributed to the IMF, its Executive Board, or its management. Byline: Matthieu Bellon [mbellon@imf.org] (*), Era Dabla-Norris [edablanorris@imf.org], Salma Khalid [skhalid@imf.org], Frederico Lima [flima@imf.org]

Keywords Immigration; Asylum; Tradable quotas; Cap and trade; Matching; Externalities Highlights * This paper revisits the theory behind tradable immigration quotas. * They are generally not utilitarian efficient for host countries. * The incentive structure differs from cap-and-trade systems for environmental protection. * Adding a matching mechanism exacerbates the inefficiency. * But tradable immigration quotas still have theoretical and practical merits. Abstract This paper revisits the theory behind tradable immigration quotas, which have been proposed to raise South-North migration and, specifically, refugee resettlement. We qualify previous research by showing that tradable immigration quotas are generally not utilitarian efficient for host countries. The reason is that global migration entails more complex externalities than other public-good problems, such as environmental protection, where market-based instruments are common. The inefficiency is exacerbated when migrants are matched to countries. Despite these caveats, we offer new results in favor of tradable immigration quotas plus matching. Author Affiliation: CUNEF Universidad, Calle Pirineos, 55, 28040 Madrid, Spain Article History: Received 8 July 2021; Revised 31 January 2022; Accepted 2 February 2022 (footnote)[white star] A previous version of this paper was titled 'A closer look at tradable immigration quotas'. I am grateful to Jesús Fernández-Huertas Moraga, Hillel Rapoport, Joseph S. Shapiro (the responsible co-editor) and three anonymous referees for many helpful comments. Byline: Martin Hagen [martin.hagen@cunef.edu]

Keywords Tax compliance; Tax enforcement; Collateral sanctions Highlights * Restricting passport access can help tax agencies collect unpaid taxes. * Notifications sent to all affected taxpayers induce modest but significant responses. * Denials for a subset making passport requests induce strong and immediate responses. * Treatment effects are stronger for higher-income taxpayers. * Program evaluation should also consider the private costs of lost passport access. Abstract Traditional penalties for tax noncompliance are financial, but many jurisdictions now also use non-monetary tools, including collateral sanctions that deny access to some government-provided service. To learn about the effectiveness of one such penalty, we examine a recent U.S. policy restricting passport access for taxpayers with substantial tax debt, known as 'certification.' We take advantage of a field experiment during the policy rollout, and find small but positive effects on taxpayer compliance of the certification notice sent to eligible taxpayers. We then study a subset of certified taxpayers who were denied a passport-related request, and find an immediate and strong positive effect of the denial on compliance. Author Affiliation: (a) University of Michigan, United States (b) Internal Revenue Service, United States * Corresponding author. Article History: Received 14 July 2021; Revised 7 February 2022; Accepted 7 February 2022 (footnote)[white star] We thank Ricardo Perez-Truglia and three referees for extremely helpful and constructive comments. An earlier version of the paper was circulated with the title 'Do Collateral Sanctions Work?' We thank Nick Gebbia, Tatiana Homonoff, Jeff Hoopes, Jan Millard, Stacy Orlett, and participants at the 2020 National Tax Association annual conference, 2021 IRS/TPC Joint Research Conference on Tax Administration, 2021 IIPF annual congress, and University of Michigan seminars for helpful comments. All data work for this project involving confidential taxpayer information was done on IRS computers by IRS employees, and at no time was confidential taxpayer data ever outside of the IRS computing environment. Organ is a student volunteer with the IRS through the Joint Statistical Research Program. Slemrod is an IRS employee under an agreement made possible by the Intragovernmental Personnel Act of 1970 (5 U.S.C. 3371--3376). The views and opinions presented in this paper reflect those of the authors. They do not necessarily reflect the views or the official position of the Internal Revenue Service. All results have been reviewed to ensure that no confidential information is disclosed. Byline: Paul R. Organ [prorgan@umich.edu] (a,*), Alex Ruda [Alexander.C.Ruda@irs.gov] (b), Joel Slemrod [jslemrod@umich.edu] (a), Alex Turk [Alex.H.Turk@irs.gov] (b)

Keywords Flaring; Air pollution; Shale development; Respiratory health; Distributional implications Highlights * Provide evidence of a causal link between natural gas flaring and health. * A 1% increase in flared natural gas increases the hospitalization rate by 0.73%. * The estimated health costs of flaring are comparable to the external climate cost. * Areas exposed to flared natural gas do not always benefit from oil and gas extraction. * Flaring disproportionately harms economically disadvantaged and communities of color. Abstract Although there is strong evidence that oil and natural gas development lead to decreases in local ambient air quality, there is less evidence of a causal link between these activities and human health. This paper explores the environmental health costs of burning natural gas by-products during crude oil extraction -- flaring. We estimate the impact of flared natural gas on respiratory health by using quasi-random variation in upwind flaring generated by the interaction of wind patterns and natural gas processing capacity. Specifically, we construct a novel dataset to estimate the causal effect of increased upwind flaring on the monthly respiratory-related hospital visitation rate by using the number of upwind wells that are connected to a capacity-constrained natural gas processing facility as an instrument for monthly upwind flaring. We find that a 1% increase in the amount of flared natural gas in North Dakota would increase the respiratory-related hospital visitation rate by 0.73%. Furthermore, zip codes that were exposed to more than half of all flared natural gas extracted less than 20% of all resource wealth during the sample time period, and the zip codes exposed to a disproportionate amount of flaring tend to be economically-disadvantaged and communities of color. Our estimates indicate that the health costs constitute a material portion of the external cost of flaring, and therefore ought to be considered in global initiatives to reduce flaring. Author Affiliation: (a) School of Economic Sciences, Washington State University, Pullman, WA 99164, United States (b) USAA, 9800 Fredericksburg Rd., San Antonio, TX 78288, United States. Disclaimer: The views expressed in this paper are solely those of the author and do not represent those of USAA Article History: Received 27 May 2020; Revised 10 January 2022; Accepted 12 January 2022 (footnote)[white star] We thank Mark Agerton, Andy Boslett, Mario Bravo, Benjamin Cowan, Jed DeVaro, Mary Evans, Tim Fitzgerald, Gautam Gowrisankaran, Catherine Hausman, Elaine Hill, Ryan Kellogg, Keith Joiner, Ryan Lampe, Ashley Langer, Derek Lemoine, Shanthi Manian, Greg Upton, and Tiemen Woutersen, as well as seminar participants at the Environmental Defense Fund, Rochester Department of Public Health Sciences, the 2017 Western Economic Association International Summer Conference, the 2020 Workshop on Economic and Environmental Effects of Oil and Gas, and the 2021 ASSA meetings for helpful comments. We also thank two anonymous reviewers and Joseph Shapiro. Aditi Surve provided excellent research assistance on this project. Byline: Wesley Blundell [wesley.blundell@wsu.edu] (a), Anatolii Kokoza (b)

Keywords COVID-19; Income and performance inequalities; Unbalanced panel of academic records; Transcript and survey data; Difference-in-differences models; And event analysis Highlights * We find an income differential effect of the pandemic on college students' GPA. * We use DiD models and event study analyses with individual fixed effects. * Low-income low-performing students outperformed their wealthier peers. * No such GPA advantage is observed among top-performing lower-income students. * Flexible grading counteracted negative shocks, especially among disadvantaged students. Abstract I use an unbalanced panel of over 11,000 academic records spanning from Spring 2017 to Spring 2020 to identify the difference in effects of the COVID-19 pandemic across lower- and higher-income students' academic performance. Using difference-in-differences models and event study analyses with individual fixed effects, I find a differential effect by students' pre-COVID-19 academic performance. Lower-income students in the bottom quartile of the Fall 2019 cumulative GPA distribution outperformed their higher-income peers with a 9% higher Spring 2020 GPA. This differential is fully explained by students' use of the flexible grading policy with lower-income ones being 35% more likely to exercise the pass/fail option than their counterparts. While no such GPA advantage is observed among top-performing lower-income students, in the absence of the flexible grading policy these students would have seen their GPA decrease by 5% relative to their counterfactual pre-pandemic mean. I find suggestive evidence that this lower performance may be driven by lower-income top-performing students experiencing greater challenges with online learning. These students also reported a higher use of incompletes than their higher-income peers and being more concerned about maintaining (merit-based) financial aid. Author Affiliation: City University of New York (CUNY), Queens College, USA Article History: Received 8 February 2021; Revised 7 January 2022; Accepted 19 January 2022 (footnote)[white star] The author would like to thank the Co-Editor Christopher Walters and two anonymous referees for excellent comments and suggestions on earlier versions of the paper. The author would also like to recognize Eva Fernandez for her support with IRB and survey design, Cheryl Littman and Lizandra Friedland for support with designing the survey and collecting the data, and Jennifer Roff for comments on the paper. (footnote)1 Queens College - CUNY, Economics Department, Powdermaker Hall, 65-30 Kissena Blvd., Queens, New York 11367, USA. Byline: Núria Rodríguez-Planas [nuria.rodriguezplanas@qc.cuny.edu] (1)

Keywords Elections; Campaign financing; Campaign expenditures; Campaign finance reform; Multiparty electoral data; Heterogeneous effects of campaign spending Highlights * We build a new comprehensive dataset of all French legislative and UK general elections over the 1993--2017 period, including comprehensive data on spending across candidates, parties and elections. * We investigate the impact of campaign spending on votes, and how it varies across election types, political parties and electoral settings. * We use several empirical specifications, including a new instrument that relies on the fact that candidates are differentially affected by regulation on the source of funding on which they depend the most, to handle the endogenous and strategic nature of campaign spending in multiparty systems. * We show that an increase in spending per voter consistently improves candidates' vote share, both at British and French elections. * We show that the effect of campaign spending is heterogeneous depending on candidates' party. In particular, we show that spending by radical and extreme parties has much lower returns than spending by mainstream parties. * We discuss a number of mechanisms that may drive these empirical findings, and highlight in particular the role played by the social stigma attached to extreme voting. Abstract What is the impact of campaign spending on votes? Does it vary across election types, political parties or electoral settings? Estimating these effects requires comprehensive data on spending across candidates, parties and elections, as well as identification strategies that handle the endogenous and strategic nature of campaign spending in multiparty systems. This paper provides novel contributions in both of these areas. We build a new comprehensive dataset of all French legislative and UK general elections over the 1993--2017 period. We propose new empirical specifications, including a new instrument that relies on the fact that candidates are differentially affected by regulation on the source of funding on which they depend the most. We find that an increase in spending per voter consistently improves candidates' vote share, both at British and French elections, and that the effect is heterogeneous depending on candidates' party. In particular, we show that spending by radical and extreme parties has much lower returns than spending by mainstream parties, and that this can be partly explained by the social stigma attached to extreme voting. Our findings help reconcile the conflicting results of the existing literature, and improve our understanding of why campaigns matter. Author Affiliation: (a) University of Oxford, United Kingdom (b) Sciences Po Paris and CEPR, France (c) Sciences Po Paris, France Article History: Received 13 April 2021; Revised 5 November 2021; Accepted 16 November 2021 (footnote)[white star] We are grateful to the Editor (Thomas Fujiwara) and to two anonymous referees for insightful comments that substantially improved the paper. We gratefully acknowledge the many helpful comments and suggestions from Micael Castanheira, Denis Cogneau, Thomas Ferguson, Nicolas Jacquemet, Benjamin Marx, Maria Petrova, Thomas Piketty, Vincent Pons, Joanne Tan, Clémence Tricaud, and Katia Zhuravskaya. We thank Michael Tomz for his precious help with the statistical suite Clarify, and Olivier Godechot for guiding us through the use of the DADS data. We are also grateful to seminar participants at the Berkeley Center for Economics and Politics, Columbia University, New York University, the Paris School of Economics, Sciences Po Paris, Yale University and Uppsala University, and to conference participants at the Junior Workshop on Political Economy (CREST - Ecole Polytechnique - ENSAE), the CEPR Public Economics Annual Symposium 2018, the INET 2017 Conference (Edinburgh) and the NBER Political Economy Meeting (Fall 2017). We thank Julien Bachorz and Patrick Roger for sharing Le Monde data on candidates' political affiliation, and Pierre Letessier for his precious help with the downloading of the Wikipedia data. Francesco Gerotto, Paul Gioia, Elisa Mougin, Ana Muresan, and Sébastien Nerincx provided outstanding research assistance. This research was generously supported by the Institute for New Economic Thinking (grant INO1500035). It is also supported by a public grant overseen by the French National Research Agency (ANR) as part of the 'Investissements d'avenir' program (reference: ANR-10-EQPX-17 -- Centre d'accès sécurisé aux données -- CASD). An online Appendix with additional empirical material is available here. All errors remain our own. Byline: Yasmine Bekkouche (a), Julia Cagé (b), Edgard Dewitte (c)

Keywords Education; Post-secondary education; Social mobility; Ethiopia; India; Pakistan; Peru; Vietnam Highlights * We present new evidence on socio-economic inequalities in education in low- and middle-income countries. * Higher test scores at 12 are associated with higher college attendance at age 22. * This association only explains 15--55% of the SES gap in completed years of schooling at age 22. Abstract The association between test scores in primary school and college attendance, and how this association differs by socioeconomic status (SES), remains an open question in low- and middle-income countries. Using data from long-running panel studies in Ethiopia, India, Pakistan, Peru and Vietnam, we show that children with higher test scores at age 12 report more years of schooling and higher college attendance by ~age 22 in every country. However, variation in test scores explain only ~15--55% of the SES gap in years of completed schooling at age 22. A striking implication is that in every country, children from low SES backgrounds who are in the 80th percentile of test scores at age 12 have similar years of completed schooling at age 22 as children from high SES backgrounds who were at the 20th percentile of test scores. Author Affiliation: (a) Georgetown University, United States (b) Stockholm School of Economics, Sweden (c) World Bank, United States * Corresponding author at: Georgetown University, Old North Building, 37th & O Street, Washington DC 20057, United States. Article History: Received 10 May 2021; Revised 16 November 2021; Accepted 2 December 2021 (footnote)[white star] We thank Natalie Bau, Mauricio Romero, Jeff Smith, anonymous referees and seminar participants at Georgetown University, CES-Ifo Economics of Education Area Conference, the RISE conference 2019 (University of Oxford), the Inter-American Development Bank and the World Bank for their valuable comments. We acknowledge funding from the Research on Improving Systems in Education programme, funded by UK aid. The Young Lives study, used for this paper, is core-funded by UK aid from the Department for International Development and was co-funded from 2010 to 2014 by the Netherlands Ministry of Foreign Affairs. The findings, interpretations, and conclusions expressed in this paper are those of the authors and do not necessarily represent the views of the World Bank, its Executive Directors, or the governments they represent. Byline: Jishnu Das [jishnu.das@georgetown.edu] (a,*), Abhijeet Singh (b), Andres Yi Chang (c)

Keywords Tax evasion; Tax avoidance; Tax enforcement; Hidden wealth Highlights * We study substitution between illegal tax evasion and legal tax avoidance. * We find little evidence of increased avoidance when wealthy individuals stop evading. * Cracking down on evasion by the wealthy can significantly raise tax payments. Abstract Exploiting rich administrative data and salient policy variation, we study the substitution between illegal tax evasion and legal tax avoidance. By increasing its enforcement effort, the Norwegian government pushed many wealthy individuals to disclose assets previously hidden abroad. We find that the taxes paid by these individuals rise 30% at the time of disclosure and that the rise is sustained over time. After stopping to evade, taxpayers do not start avoiding more. Our results suggest that cracking down on evasion by the wealthy can be an effective way to raise tax revenue, increase tax progressivity, and ultimately reduce inequality. Author Affiliation: (a) Norwegian University of Life Sciences, Norway (b) University of Copenhagen, CEBI and CEPR, Denmark (c) Sciences Po Paris, France (d) UC Berkeley and NBER, United States * Corresponding author. Article History: Received 11 September 2020; Revised 7 November 2021; Accepted 28 December 2021 (footnote)[white star] Part of the material in this study appeared in the working paper version of the paper: 'Tax Evasion and Inequality', NBER working paper #23772, September 2017. We thank the Norwegian Tax Administration for their goodwill and cooperation, and we are grateful for financial support from the Research Council of Norway, grant 262522/F10. Further, Zucman gratefully acknowledges financial support from the Laura and John Arnold Foundation. The activities of CEBI are financed by the Danish National Research Foundation, Grant DNRF134. Byline: Annette Alstadsæter [annette.alstadsater@nmbu.no] (a), Niels Johannesen [niels.johannesen@econ.ku.dk] (b,*), Ségal Le Guern Herry [segal.leguernherry@sciencespo.fr] (c), Gabriel Zucman [zucman@berkeley.edu] (d)

Keywords Business taxation; Tax incentives; Wage incidence; Rent sharing Highlights * We study the wage effect of a large corporate tax credit in France. * The size of tax credit depends on the payroll of workers paid less than a threshold. * We find that half of the surplus generated by the reform falls onto workers. * Wage gains are restricted to incumbents in high-skill occupations. * The retention rate of these categories of workers increases. * Firms do not adjust wages in response to worker individual eligibility. Abstract Do workers gain from lower business taxes, and why? We estimate how a large corporate income tax credit in France is passed on to wages and explore the firm- and employee-level underlying mechanisms. The amount of tax credit firms get depends on their payroll share of workers paid less than a wage threshold. Exposure to the policy thus varies both across workers depending on their wage and across firms depending on their wage structure. Using exhaustive employer-employee data, we find that half of the surplus generated by the reform falls onto workers. Wage gains load on incumbents in high-skill occupations. The wage earnings of low-skill workers--nearly all individually eligible--do not change. This heterogeneous wage incidence is unlikely to be driven by scale effects or skill complementarities. We find that the groups of workers benefiting from wage gains are also more likely to continue working for the same firm. Further, we show that firms do not change their wage-setting behavior in response to the individual eligibility status of workers. Overall, our results suggest that the wage incidence of the tax credit operated collectively through rent-sharing and benefited workers most costly to replace. Author Affiliation: (a) Université Paris 8 Vincennes - Saint-Denis, LED, LIEPP Sciences Po, Banque de France, France (b) Paris School of Economics, Institut des politiques publiques, France and IZA, Germany (c) Banque de France, Institut des politiques publiques, France (d) University of Mannheim, Germany and LIEPP Sciences Po, France * Corresponding author at: IPP-PSE, 48 boulevard Jourdan, 75014 Paris, France. Article History: Received 11 February 2020; Revised 3 November 2021; Accepted 7 December 2021 (footnote)[white star] The authors thank the editor, Owen Zidar, and two anonymous referees for their very valuable comments and suggestions. A previous version of this paper was circulated under the title: 'Wage Incidence of a Large Corporate Tax Credit: Contrasting Employee- and Firm-Level Evidence'. We are grateful to Antoine Bozio, Thomas Breda, Michael Devereux, Marc Ferracci, Denis Fougère, Sergei Guriev, Camille Landais, Etienne Lehmann, Philippe Martin, Thierry Mayer, Benoit Ourliac, Bruno Palier, Thomas Piketty, Emmanuel Saez, Sebastian Siegloch, Etienne Wasmer and participants at AFSE, RES, EALE, LAGV, PET, IIPF, EEA conferences, IEB workshop on economics of taxation, PSE and Le Mans seminars for their comments. This work is supported by public grants overseen by the French National Research Agency (ANR) as part of the 'Investissements d'avenir' program within the frameworks of the Centre d'accès sécurisé aux données (ANR-10-EQPX-17) and the LIEPP center of excellence (ANR-11-LABX-0091, ANR-11-IDEX-0005--02) and by France Strategie. Malgouyres acknowledges financial support from the ANR through project ANR-19-CE26-0004 and EUR grant ANR-17-EURE-0001. The views expressed in this paper do not reflect those of the Banque de France/ Eurosystem. Byline: Clément Carbonnier (a), Clément Malgouyres [clement.malgouyres@ipp.eu] (b,*), Loriane Py (c), Camille Urvoy (d)

Keywords Minimum wages; Wage effects; Spillover effects; Returns to skills; Unconditional quantile regression; Scale effect; Substitution effect; Skill supply; Labor-labor substitution Highlights * We study the effect of a minimum wage that was set relatively high during an economic downturn. * We find wage increases for low-wage workers that ripple out to workers beyond the median wage. * The minimum wage reduced real wages for better-paid workers, returns to skills and skill supply. * Negative spillovers result from negative scale effects that exceed positive substitution effects. Abstract Minimum wage levels are rising around the globe. To shed more light on the possible unintended side effects of higher wage floors, we study the impact of a minimum wage introduction on wages and employment in a quasi-experimental setting where the minimum wage is set extraordinarily high during an economic downturn. We identify treatment effects along different wage and skill groups and find positive wage and employment spillover effects for medium-skilled workers with salaries just above the minimum wage. More striking, we find negative wage and employment effects for high-skilled workers who are further up the wage distribution, followed by reduced returns to skills and industry skill supply. We explain these adjustments with a substitution-scale model that predicts negative spillover effects whenever labor-labor substitutions toward high-skilled workers are overcompensated by an overall decline in industry employment. Even though we focus on a specialized industry, we lay out the general conditions under which such unfavorable adjustments may occur in other contexts. Author Affiliation: (a) Institute of Labor Economics (IZA), Bonn, Germany (b) ZEW -- Leibniz Centre for European Economic Research, Mannheim, Germany (c) Utrecht University, the Netherlands (d) CESifo Research Network Affiliate, Germany Article History: Received 24 May 2021; Revised 15 November 2021; Accepted 15 December 2021 (footnote)[white star] We thank Jeffrey Clemens, three anonymous referees, Melanie Arntz, Stephan Dlugosz, Bernd Fitzenberger, Heinrich Kögel, Michael Maier, Joachim Möller, David Neumark, and Anna Salomons as well as participants of the seminars at Utrecht University, ZEW Mannheim, University of Regensburg, DIW-Conference on the 'Evaluation of Minimum Wages,' and the annual congresses of the Society of Labor Economists (SOLE), European Economic Association (EEA), and German Economic Association (VfS) for helpful comments and suggestions. We further thank the Central Pay Office (LAK) of the roofing industry for providing us with hourly wage data. Our paper was partly financed by the ZEW Sponsors' Association for Science and Practice, and by the state of Baden-Württemberg within the SEEK program, and it profited from a preceding evaluation of minimum wage effects in the German roofing industry that was financed by the German Federal Ministry of Labor and Social Affairs (BMAS). The results and conclusions derived in this study do not necessarily reflect the views of the BMAS. This paper builds on an earlier version, 'When the Minimum Wage Bites Back: Quantile Treatment Effects of a Sectoral Minimum Wage in Germany,' ZEW Discussion Paper No. 14-133. Byline: Terry Gregory [gregory@iza.org] (a,b), Ulrich Zierahn [u.t.zierahn@uu.nl] (b,c,d)

Keywords COVID-19; Wage earnings; Stimulus checks; Unemployment insurance; Countercyclical policy Highlights * More low-earning workers saw earnings declines in 2020 than in the Great Recession. * Unemployment insurance offset earnings declines for many low-earning workers. * After UI, declines for low-earning workers were less common than in 2009 and 2019. * Tax records can provide a timely source of information on annual earnings changes. Abstract This paper documents the magnitude and distribution of U.S. earnings changes during the COVID-19 pandemic and how fiscal relief offset lost earnings. We build panels from administrative tax data to measure annual earnings changes. The frequency of earnings declines during the pandemic were similar to the Great Recession, but the distribution was different. In 2020, workers starting in the bottom half of the distribution were more likely to experience an earnings decline of at least 10 percent. While most workers experiencing large annual earnings declines do not receive unemployment insurance, over half of beneficiaries were made whole in 2020, as unemployment insurance replaced a median of 105 percent of their annual earnings declines. After incorporating unemployment insurance, the likelihood of large earnings declines among low-earning workers was not only smaller than during the Great Recession, but also smaller than in 2019. Author Affiliation: (a) Federal Reserve Board, 20th St. and Constitution Ave. N.W., Washington, DC 20551, United States (b) Joint Committee on Taxation, 502 Ford House Office Building, Washington, DC 20515, United States * Corresponding author. Article History: Received 14 July 2021; Revised 15 December 2021; Accepted 30 December 2021 (footnote)[white star] Larrimore: The results and opinions expressed in this paper reflect the views of the authors and should not be attributed to the Federal Reserve Board. Mortenson and Splinter: This paper embodies work undertaken for the staff of the Joint Committee on Taxation, but as members of both parties and both houses of Congress comprise the Joint Committee on Taxation, this work should not be construed to represent the position of any member of the Committee. Byline: Jeff Larrimore [Jeff.Larrimore@frb.gov] (a,*), Jacob Mortenson [Jake.Mortenson@jct.gov] (b), David Splinter [David.Splinter@jct.gov] (b)

Keywords Taxation; Alcohol consumption; Pass-through; Sin taxes; Difference-in-differences Highlights * We exploit the natural experiment of unexpected alcohol tax increases in Illinois. * We find that the tax is over-shifted to consumers by a factor of up to 1.5. * Sales of taxed spirits and wine drop moderately but more so for inexpensive products. * Beer purchases increase, further curbing tax-induced drops in ethanol consumption. Abstract We show that tax-induced increases in alcohol prices can lead to substantial substitution and avoidance behavior that limits reductions in alcohol consumption. Causal estimates are derived from a natural experiment in Illinois where spirits and wine taxes were raised sharply and unexpectedly in 2009. Beer taxes were increased by only a trivial amount. We construct representative and consistent measures of alcohol prices and sales from scanner data collected for hundreds of products in thousands of stores across the US. Using several difference-in-differences models, we show that alcohol excise taxes are instantly over-shifted. That is, a $1 tax increase translates into a price increase of up to $1.50. We find evidence suggesting that consumers react by switching to less expensive products. In particular, they increase purchases of beer, thus significantly moderating any tax-induced reductions in total ethanol consumption. Our study highlights the importance of tax-induced substitution, the implications of differential tax increases by beverage group and the impacts on public health of alternative types of tax hikes whose main aims are to increase revenue. Author Affiliation: (a) University of Strathclyde, United Kingdom (b) IZA, Germany (c) NBER, United States (d) CUNY Graduate Center, United States * Corresponding author at: University of Strathclyde, United Kingdom. Article History: Received 28 April 2020; Revised 6 September 2021; Accepted 17 September 2021 (footnote)[white star] Research for the paper was supported by grant number 1R21AA025371A1 from the National Institute on Alcohol Abuse and Alcoholism to the National Bureau of Economic Research. This paper was presented at the Eighth Conference of the American Society of Health Economists, at the Second Hamburg Center for Health Economics Risky Health Behaviors Workshop, at the Applied Micro Workshop at the Hertie School of Governance in Berlin, and at seminars at the University of Dundee and the University of Essex. We would like to thank participants in those events, especially Maria Sanmartin, for helpful comments and suggestions. We also would like to thank Owen Zidar (the co-editor of this journal in charge of our submission) and three anonymous reviewers for helpful comments and suggestions. We are grateful to Ege Aksu and Daniel Dench for their excellent research assistance and comments. Our own analyses in this paper calculated (or derived) are based in part on data from Nielsen Consumer LLC and marketing databases provided through the NielsenIQ Datasets at the Kilts Center for Marketing Data Center at The University of Chicago Booth School of Business. Information about the data and access are available at http://research.chicagobooth.edu/nielsen/. The NielsenIQ Retail Scanner Data is the one used in this paper. The conclusions drawn from the NielsenIQ data are those of the researcher(s) and do not reflect the views of NielsenIQ. NielsenIQ is not responsible for, had no role in, and was not involved in analyzing and preparing the results reported herein. Byline: Markus Gehrsitz [markus.gehrsitz@strath.ac.uk] (a,b,*), Henry Saffer (c), Michael Grossman (c,d,b)

Keywords Corporate taxation; Firm mobility; Tax competition Highlights * When average firm mobility falls, local governments set higher tax rates. * We confirm this using the rapid growth of wind turbines in Germany for identification. * After immobile firm entry, municipalities increased corporate taxes by up to 24%. Abstract Capital mobility is one of the key determinants of corporate tax rates. We first show theoretically that governments will set higher tax rates on firm profits after an immobile firm has entered. We then test this prediction in a well-identified setting, using the rapid growth of wind power plants (a very immobile industry) and the large variation in local business taxes across Germany for identification. We confirm that municipalities increase corporate tax rates by up to 24% after immobile firm entry. The effect is stronger when immobile firms make up a larger share of the overall tax base. Author Affiliation: (a) KU Eichstätt-Ingolstadt, CESifo, Germany and WU Vienna, Austria (b) University of Oxford, United Kingdom and DIW, Germany * Corresponding author. Article History: Received 19 March 2019; Revised 13 April 2021; Accepted 29 September 2021 (footnote)[white star] We thank Juan Carlos Suárez Serrato (the editor), two anonymous reviewers, Johannes Becker, Steve Bond, Andreas Haufler, Ben Lockwood, Rainer Niemann (discussant), Georg Schaur, Kurt Schmidheiny (discussant), Johannes Voget (discussant) and participants at conferences by the German Economic Association and the Royal Economic Society, the MaTax conference, the summer symposium of the Oxford Centre for Business Taxation, the Norwegian-German Seminar for Public Economics, the CESifo Venice Summer Institute, and at seminars at the Universities of Bochum, Dublin, Linz, Munich, Oslo, Oxford and Tübingen for very helpful comments. Work on this paper was started when Dominika Langenmayr was visiting Oxford University Centre for Business Taxation, she is grateful for their hospitality. We gratefully acknowledge financial support from the German Research Foundation (Langenmayr: LA 3565/1--1, Simmler: SI 2050/1--1). A longer version of the paper was previously circulated under the title 'Why the Current Tax Rate Tells You Little: Competing for Mobile and Immobile Firms'. Byline: Dominika Langenmayr [dominika.langenmayr@ku.de] (a,*), Martin Simmler [martin.simmler@sbs.ox.ac.uk] (b)

Keywords Pollution policy; Embodied carbon; Carbon footprints; Leakage Highlights * Taxing consumers unilaterally can reduce carbon footprints everywhere. * Variety loss and productivity decline can drive negative footprint leakage. * Quality erosion spoilsports the supply of dirty goods to unregulated consumers. Abstract This paper uses simple variants of Melitz (2003) to illustrate how a unilateral consumption tax can reduce consumption everywhere. The tax--levied on the carbon embodied in consumer goods--reduces demand for dirty goods, lowering the profitability of the global industry. As profitability falls, so does entry, reducing competitive pressure on remaining firms. Less entry and competition translates to fewer varieties and higher average prices for all consumers, including in policy-inactive countries. As a result, a unilateral tax on embodied carbon may reduce the carbon footprint of every country. Author Affiliation: Food and Resource Economics, Faculty of Land and Food Systems, University of British Columbia, 337 - 2357 Main Mall, Vancouver, B.C. V6T 1Z4, Canada Article History: Received 22 November 2019; Revised 27 September 2021; Accepted 4 October 2021 (footnote)[white star] I thank seminar participants at Korea University, Nagoya University, Nanzan University, University of British Columbia, and the Canadian Resource and Environmental Economics Association Annual conference for comments and discussion. Tatiana Zárate Barrera provided valuable research assistance for this paper. My thanks also to the editor and two anonymous referees for exceptionally helpful suggestions on drafts of this paper. Byline: Carol McAusland [carol.mcausland@ubc.ca]

Keywords Gradual policy implementation; Endogenous status quo; Political alternation; Polarization; Moderation; Efficiency; Robustness Highlights * This paper proposes a novel explanation for political alternation in democracies. * The idea is that alternation keeps policy from drifting too far to either extreme. * This argument requires gradual implementation of policies. This is a new ingredient. * In equilibrium, alternation arises endogenously. * Also, we identify a linkage between institutional rigidities and policy polarization. Abstract This paper presents a novel explanation for political alternation in democracies, rooted in the benefit for the median voter of keeping policy from drifting too far to either extreme. Central to this argument is the idea that policy change is gradual and that this gradualism depends on the institutional flexibility/rigidity of the country. Built on this idea, we propose a model of dynamic elections and show that institutional rigidities cause alternation. We also show that, though institutional rigidities prevent governments from implementing extreme policies, they incentivize parties to polarize as much as they can. However, more flexible institutions can foster moderation. Last, we analyze the resilience of equilibrium policies to players' impatience and discuss extensions of our model, including office-motivated parties, the cost of alternation, alternation every two terms, and asymmetric policies. Author Affiliation: (a) Dpto. Teoría e Historia Económica, Universidad de Málaga, Málaga, Spain (b) Department of Economics, Royal Holloway, University of London, United Kingdom * Corresponding author. Article History: Received 24 July 2020; Revised 6 September 2021; Accepted 6 October 2021 (footnote)[white star] We thank the co-editor, Maria Petrova, and three anonymous referees for their very helpful comments. We also thank Andrzej Baranski-Madrigal, Sourav Bhattacharya, María Cubel, Bernand Groffman, Gilat Levy, Antoine Loeper, James Snyder, and seminar participants at Universidad Pablo de Olavide, Universidad de Málaga, the 2016 ASSET Conference in Thessalonika, the 2017 UECE Game Theory Meeting in Lisbon, the 2018 Workshop in Quantitative Economics in Alicante, the 2018 NICEP Conference in Nottingham, and the 2018 Priorat Workshop for Women in Political Economics in Falset. We gratefully acknowledge the financial support from the Ministerio de Ciencia e Innovación through project RTI2018-097620-B-I00 and the Junta de Andalucía-FEDER through projects UMA18-FEDERJA-243 and P18-FR-3840. The usual disclaimer applies. Declarations of interest: none. Byline: Ascensión Andina-Díaz [aandina@uma.es] (a,*), Francesco Feri [Francesco.Feri@rhul.ac.uk] (b), Miguel A. Meléndez-Jiménez [melendez@uma.es] (a)

Keywords Far-right parties; Immigration; Policy attitudes; Political backlash Abstract This paper studies how public attitudes towards reduced immigration, the signature policy of the far-right Sweden Democrats, respond once the party increases their political representation at the local level. To identify causal effects, we use panel data from 290 municipal election districts and compare otherwise similar elections where the Sweden Democrats either barely win or lose an additional seat. We estimate that a one seat increase for this far-right, anti-immigration party decreases negative attitudes towards immigration by 1.8 or 4.1 percentage points (depending on which national survey we use), contrary to the party's policy position. Consistent with these attitudinal changes, we find suggestive evidence the Sweden Democrats lose the incumbency advantage experienced by other small parties in Sweden. Exploring possible mechanisms, we find evidence for higher politician turnover and a rise in negative newspaper coverage. These findings demonstrate that political representation can cause an attitudinal backlash as a fringe party and their ideas are placed under closer scrutiny. Author Affiliation: (a) Department of Economics and Statistics, Linnaeus University, Sweden (b) Department of Economics, UC San Diego, United States (c) Norwegian School of Economics, Norway (d) NBER, United States (e) CESifo, Germany (f) CEPR, United Kingdom (g) IZA, Germany (h) Swedish Institute for Social Research, Stockholm University, Sweden * Corresponding author at:Department of Economics, UC San Diego, United States. Article History: Received 17 November 2020; Revised 13 September 2021; Accepted 6 October 2021 (footnote)[white star] This paper is a major revision of an earlier paper titled 'Do Politicians Change Public Attitudes?' Byline: Magnus Carlsson [magnus.carlsson@lnu.se] (a), Gordon B. Dahl [gdahl@ucsd.edu] (b,c,d,e,f,g,*), Dan-Olof Rooth [dan-olof.rooth@sofi.su.se] (h,g)

Keywords Collaborative tax evasion; Collusive tax evasion; Random audits; Undeclared work; Third-party reporting Abstract Third-party reporting and employers' tax withholding are powerful compliance mechanisms, as long as the employer and employee do not collude to evade. In cooperation with the Norwegian Tax Administration we designed a randomized field experiment with unannounced on-site audits. Matching audit data to administrative registers, we provide evidence of collusive tax evasion. We find that firms assigned to be audited increased their subsequent wage reporting on behalf of their employees by 18 percent relative to firms assigned to the control group. The effect is more pronounced among small firms with few employees. Our results document limitations of third-party reporting, but also that these limitations can be counteracted by minor on-site audits. Author Affiliation: (a) School of Economics and Business, Norwegian University of Life Sciences , P.O. Box 5003, N-1432 ÅS, Norway (b) Research Department, Statistics Norway, Norway Article History: Received 20 March 2021; Revised 9 July 2021; Accepted 3 September 2021 (footnote)[white star] We thank the Norwegian Tax Administration for the cooperation with the randomized audits and for data access. We are grateful from constructive comments and suggestions from Owen Zidar (Co-Editor of this journal) and five anonymous referees, as well as from Brita Bye, Edwin Leuven, Simon Quinn, and numerous seminar and conference participants. Marie Bjørneby would like to thank Statistics Norway for their hospitality during the work on this paper. Financial support from The Research Council of Norway (grants 283,322 and 239225) and The Nordic Tax Research Council is gratefully acknowledged. A longer version of this paper was previously circulated as 'Collusive tax evasion by employers and employees: Evidence from a randomized field experiment in Norway'. Byline: Marie Bjørneby [marie.bjorneby@nmbu.no] (a), Annette Alstadsæter [annette.alstadsater@nmbu.no] (a), Kjetil Telle [kjetil.telle@ssb.no] (b)

Keywords Extending Unemployment Benefits; Re-employment Bonus; Marginal Rate of Substitution; Behavioral Cost; Regression Discontinuity (Kink) Design Highlights * We investigate the welfare effects of extending unemployment benefits by comparing the search effort responses to income transfers when employed (i.e. re-employment bonus) and unemployed (i.e. extended benefits). * The provision of re-employment bonus increases job-finding hazards and results in the positive fiscal externality. * Extending unemployment benefits reduces the rate of unemployment exit and generates the negative fiscal externality. * The welfare gain from benefit extension is larger than its welfare cost by more than 30%. Abstract This paper investigates the welfare effects of extending unemployment benefits by comparing the search effort responses to income transfers when employed (i.e. re-employment bonus) and unemployed (i.e. extended benefits). Specifically, we use administrative data on the universe of unemployment spells in Taiwan from 2001 to 2011 and evaluate effects of providing a re-employment bonus and extending unemployment benefits. Our results suggest that the provision of re-employment bonus increases job-finding hazards and results in the positive fiscal externality. The behavioral costs per New Taiwanese Dollar (NTD) of initial spending on bonuses is -0.61. In contrast, extending unemployment benefits reduces the rate of unemployment exit and generates the negative fiscal externality. We integrate the estimated policy effects with a search model with liquidity constraints to identify the value of extending unemployment benefits captured by the marginal rate of substitution (MRS) between consumption when unemployed and employed. We find that the estimated MRS of extending benefits is around 1.5 to 2.5 -- the marginal value of transfers when unemployed is about two times larger than that when employed. Finally, the marginal value of public fund for extending UI benefits is between 1.3 and 2, suggesting the welfare gain from benefit extension is larger than its welfare cost by more than 30%. Author Affiliation: (a) National Chengchi University, Taiwan (b) Institute of Economics, Academia Sinica, Taiwan * Corresponding author at: National Chengchi University, Department of Economics, 64, Sec. 2, Tz-Nan Rd., Taipei 116, Taiwan. Article History: Received 23 December 2019; Revised 31 July 2021; Accepted 25 August 2021 (footnote)[white star] Po-Chun wishes to thank Steve Woodbury, Carl Davidson, Steven Haider, and Todd Elder for their guidance and support at Michigan State University. Tzu-Ting wants to thank excellent assistance from Yung-Yu Tsai, Yu-Ping Hsiao and Yan-Yu Chiou. We thank the editor (Johannes Spinnewijn) and three anonymous referees for their valuable comments. We also thank Andrew Shephard, Yingying Dong, Betsey Stevenson, Taehyun Ahn, and participants at the North American Econometric Society Summer Meeting, the UM-MSU-UWO Labor Day Conference, the Canadian Labour Economics Forum, National Tax Association Annual Meeting, SOLE Annual Meeting, ASSA Annual Meeting, and the Learning from Taiwan Workshop at Seoul National University for their helpful comments. The unemployment insurance data were provided by the Bureau of Labor Insurance. This paper represents the views of the authors and does not reflect those of the Bureau of Labor Insurance. Po-Chun acknowledges financial support from the Chiang Chin-kuo Foundation and Ministry of Science and Technology (MOST-106-2410-H-004-187). Tzu-Ting acknowledges financial support from Ministry of Science and Technology (MOST-105-2410-H-001-014 and MOST-107-0210-01-19-03). Byline: Po-Chun Huang [huangpo5@nccu.edu] (a,*), Tzu-Ting Yang [ttyang@econ.sinica.edu.tw] (b)

Keywords Economics of religion; Discrimination; Club goods; Extremism Highlights * The religious club model is extended to incorporate three features. * Increasing returns create a tradeoff between club size and participation intensity. * Strict religious sects can emerge after periods of liberalization. * Persecuted minorities can become stricter and more cohesive. * Religious competition moderates religious participation. Abstract The religious club model is central to the economics of religion. To expand its scope for application, we develop the first model to combine (i) increasing returns to membership, (ii) discrimination, and (iii) religious competition. Any degree of non-rivalry in religious club goods introduces scale effects which require new analytical techniques. Due to increasing returns, a religious leader faces a trade-off between forming a large inclusive club and screening out less committed types to form a small strict club. Endogenous screening makes religious strictness a non-monotonic function of economic development, which is consistent with the emergence of strict sects following periods of liberalization and economic growth. Blanket discrimination against all community members makes the religious community stricter and more cohesive, explaining the survival of religious sects and minorities under persecution. Stigmatizing actively religious members promotes social integration on the whole, but can create an extreme isolationist sect. Contrary to prior work on religious markets, we uncover a mechanism by which religious competition reduces religious participation and boosts social integration. Thus, attempts to moderate religion by stigmatizing participation and restricting competition could backfire. Finally, our model provides guidance for empirical work on religious discrimination and further extensions of the religious club model. Author Affiliation: (a) Department of Economics and Institute for Mathematical Behavioral Sciences, University of California, Irvine, 3151 Social Science Plaza, Irvine, CA 92697, United States (b) David D. Reh School of Business, Clarkson University, Potsdam, NY 13699, United States * Corresponding author. Article History: Received 16 August 2020; Revised 5 July 2021; Accepted 7 July 2021 (footnote)[white star] We are grateful for comments by the editor and referees, Alberto Alesina, Ran Abramitzky, Robert Barro, Samuel Bazzi, Eli Berman, Lisa Blaydes, Gary Cox, Martin Fiszbein, Larry Iannaccone, Saumitra Jha, Asim Khwaja, Timur Kuran, David Laitin, Mike McBride, Rachel McCleary, Alireza Naghavi, Nathan Nunn, Debraj Ray, Jared Rubin, Stergios Skaperdas, Peyton Young, as well as participants at the 2018 ASREC conference, 2017 ERINN Conference, 2017 AALIMS Conference, 2017 NES Conference 'Towards Effective and Equitable Development: the Role of Institutions and Diversity', 2016 ASREC conference, 2015 IMBS Workshop on the Economics of Religion and Culture, and seminar participants at Harvard, Stanford, Boston University and UC Riverside. Patrick Julius provided excellent research assistance. A previous working paper, circulated under the title 'The Economics of Religious Communities: Social Integration, Discrimination and Radicalization', was split into this and a separate paper titled 'Radicalization'. Byline: Jean-Paul Carvalho [jpcarv@uci.edu] (a,*), Michael Sacks [msacks@clarkson.edu] (b)

Keywords Sales tax nexus; Small business; Entrepreneurship; Wayfair Abstract We present the first empirical analysis of the relationship between sales tax collection obligations, or nexus, and business activity. The recent Supreme Court decision in the Wayfair case upended the long-standing physical presence requirement for sales tax nexus, and opened the door for states to enforce sales tax collection obligations on remote sellers that have sufficient economic presence in the buyer's state. In an effort to inform the ongoing policy discussion, we make use of state-level panel data to explore the extent to which changes in sales tax nexus were associated with changes in firm activity between 1979 and 2014. Our results suggest that increasing sales tax base breadth by 1 percentage point generates 0.14 percent additional firms and establishments and 0.2 percent higher employment levels. Furthermore, increasing the share of online companies with nexus by 1 percentage point translates into 0.1 percent additional (small) firms as the sales-tax-collection obligation is dispersed among a larger share of firms. Results from a simulation show that unwinding half of the observed base narrowing could have generated as many as 90,350 firms, 113,600 establishments, and 2.9 million jobs during the time period. These results provide suggestive evidence of the future impact of sales tax base recovery that will result from more neutral nexus standards in the post-Wayfair world. Author Affiliation: Boyd Center for Business and Economic Research, The University of Tennessee, 916 Volunteer Boulevard, Knoxville, TN 37996, United States * Corresponding author. Article History: Received 27 April 2020; Revised 29 April 2021; Accepted 24 June 2021 (footnote) We thank David Agrawal, Celeste Carruthers, Bill Fox, Enda Hargaden, Matthew Harris, Lawrence Kessler, LeAnn Luna, James Poterba, Marianne Wanamaker, and participants at the 2019 National Tax Association Annual Conference on Taxation for numerous conversations, comments, and suggestions that have greatly improved the quality of this paper. We also thank Owen Zidar and three anonymous referees, each of which provided comments that undoubtedly improved this paper, Vickie Cunningham for standardized sales tax collection data, and LeAnn Luna for hand-collected nexus data. This work did not receive financial support. Byline: Richard Beem [rbeem1@vols.utk.edu] (*), Donald Bruce [dbruce@utk.edu]

Keywords Payroll taxes; Employment; Hysteresis Abstract This paper uses administrative data to analyze a large and 8-year long employer payroll tax rate cut in Sweden for young workers aged 26 or less. We replicate previous results documenting that during the earlier years of the reform, it raised youth employment among the treated workers, driven by labor demand (as workers' take-home wages did not respond). First, drawing on additional years of data, this paper then documents that the longer-run effects during the reform are twice as large as the medium-run effects. Second, we document novel labor-demand-driven 'hysteresis' from this policy -- i.e. persistent employment effects even after the subsidy no longer applies -- along two dimensions. Over the lifecycle, employment effects persist even after workers age out of eligibility. Three years after the repeal, employment remains elevated at the maximal reform level in the formerly subsidized ages. These hysteresis effects more than double the direct employment effects of the reform. Discrimination against young workers in job posting fell during the reform and does not bounce back after repeal, potentially explaining our results. Author Affiliation: (a) University of California, 530 Evans Hall #3880, Berkeley, CA 94720, United States (b) Stockholm University, Universitetsvagen 10 A, 106 91 Stockholm, Sweden Article History: Received 13 April 2020; Revised 24 May 2021; Accepted 1 June 2021 (footnote)[white star] We thank co-editor Alex Gelber, David Card, Peter Fredriksson, Patrick Kline, and three anonymous referees for useful comments. Jesper Ekman, Clancy Green, Linn Hansen, and Katie Donnelly Moran provided outstanding research assistance. We acknowledge financial support from NSF Grant SES-1559014; the Center for Equitable Growth at UC Berkeley and FORTE Grant 2015-00490. Byline: Emmanuel Saez [saez@econ.berkeley.edu] (a), Benjamin Schoefer [schoefer@berkeley.edu] (a), David Seim [david.seim@ne.su.se] (b)

Keywords Optimal taxation; Tax perturbation; Multiple dimensions; Jumping effects Highlights * We characterize optimal income tax schedules with multidimensional heterogeneity. * We account for the possibility that agents have multiple optimal incomes. * We quantify jumping effects that occur when individuals have multiple optima. * We provide a partial characterization of when jumping effects will occur. * We devise a novel simulation method to solve for optimal tax schedules. Abstract This paper develops a general theory of optimal income taxation with multiple dimensions of agent heterogeneity. The main technical hurdle in developing this theory is the possibility that individuals have multiple optimal incomes. Using a perturbation approach, we derive optimal tax formulas that account for the possibility that individuals have multiple optima and, hence, account for the possibility that individuals jump between their optimal income levels when we perturb the tax schedule. We quantify the magnitude of these effects, thereby augmenting the optimal tax formulas from Saez (2001) with additional 'jumping effect' terms. We provide a partial characterization of when individuals with multiple optimal incomes may exist under the optimal tax schedule. Finally, we derive a new methodology to simulate optimal income tax schedules with multidimensional heterogeneity. We implement this method numerically, showing that individuals with multiple optimal income levels can exist under the optimal tax schedule. Author Affiliation: (a) World Bank, United States (b) Tulane University, United States * Corresponding author. Article History: Received 10 September 2020; Revised 26 April 2021; Accepted 5 May 2021 (footnote)[white star] We would like to thank Doug Bernheim, Raj Chetty, Caroline Hoxby, and Florian Scheuer for their guidance and support on this project. We'd also like to thank Anne Brockmeyer, Pierre Bachas, Juan Rios, Emmanuel Saez, Claus Thustrup Kreiner, two anonymous referees, and participants at various seminars at Stanford University and Tulane University for their very useful feedback and comments on this project. Finally, thanks to The Ric Weiland Graduate Fellowship in the School of Humanities and Sciences, the B.F. Haley and E.S. Shaw Fellowship for Economics, and the Arthur and Eva Karasz Fellowship for financial support. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. Byline: Katy Bergstrom [kbergstrom@worldbank.org] (a), William Dodds [williamcdodds@gmail.com] (b,*)

Keywords Carbon market; Emission trading; Power plant; Electricity generation Highlights * We provide firm-level evidence on the effectiveness of China's ETS pilots. * The ETS pilots have no effect on coal efficiency of participating power plants. * Reductions in coal consumption and output are associated with the ETS participation. * Reductions in output are unlikely driven by market incentives of emission trading. Abstract This paper provides retrospective firm-level evidence on the effectiveness of China's carbon market pilots in reducing emissions in the electricity sector. We show that the carbon emission trading system (ETS) has no effect on changing coal efficiency of regulated coal-fired power plants. Although we find a significant reduction in coal consumption associated with ETS participation, this reduction was achieved by reducing electricity production. The output contraction in the treated plants is not due to their optimizing behavior but is likely driven by government decisions, because the impacts of emission permits on marginal costs are small relative to the controlled electricity prices and the reduction is associated with financial losses. In addition, we find no evidence of carbon leakage to other provinces, but a significant increase in the production of non-coal-fired power plants in the ETS regions. Author Affiliation: (a) School of Economics and Management, Hang Lung Center for Real Estate, Tsinghua University, Beijing, China (b) Harvard China Project on Energy, Economy and Environment, School of Engineering and Applied Sciences, and Resources for the Future, Washington, DC, USA (c) School of Economics and Management, Beihang University, Beijing, China (d) Institute of Energy, Environment and Economy, Tsinghua University, Beijing, China * Corresponding author. Article History: Received 5 October 2019; Revised 7 June 2021; Accepted 14 June 2021 (footnote)[white star] We thank the editor and two anonymous referees, as well as Jingbo Cui, Xiaomeng Cui, Ying Fan, Kathrine von Graevenitz, Stephen Jarvis, Guojun He, Andreas Lange, Mingquan Li, Kamiar Mohaddes, Peter Nilsson, Yun Qiu, Wolfram Schlenker, Qu Tang, Ulrich Wagner, Chunhua Wang, Haitao Yin, Da Zhang, Junjie Zhang, and Jinhua Zhao, for their comments and suggestions. We thank the participants at the 2019 workshop on environmental and energy economics at Shanghai Jiao Tong University, the workshop at Jinan University, the EAERE 2019 Summer School, the 2019 Resource Security and Economic Science Workshop at Xiamen Univerisity, the 2020 China Energy Modeling Forum, and the 2021 Annual Conference of Government and Economics at Tsinghua University. This paper was supported by the National Key Research and Development Program of China under grant numbers 2020YFA0608603 and 2017YFA0603602, the National Natural Science Foundation of China under grant numbers 71690244 and 71461010701, and the grant to Harvard China Project for 'China 2030/2050: Energy and Environmental Challenges for the Future' by the Harvard Global Institute. Byline: Jing Cao [caojing@sem.tsinghua.edu.cn] (a), Mun S. Ho [munho@seas.harvard.edu] (b), Rong Ma [rongma@buaa.edu.cn] (c,*), Fei Teng [tengfei@tsinghua.edu.cn] (d)

Keywords Relational contract; Political connection; Chinese economy; Tax reform Abstract This paper studies favor exchange between governments and firms in China by exploiting a quasi-experiment tax reform. A tax revenue-sharing rule between central and local governments was announced in October 2001: the higher the local tax revenue in 2001, the higher the share of the tax revenue that stays at local afterward. I find that local governments that granted more favors to firms before the reform received more assistance from firms to raise the tax revenue in 2001; in turn, an abnormally high government subsidy was returned to firms that offered assistance. This paper demonstrates that a reciprocal relationship between governments and firms beyond the simple trading of personal favors could arise in non-democratic societies where politicians face no electoral incentives. The fact that firms and governments could mutually benefit from this reciprocal relationship helps explain the exceptional economic growth in China despite its unfavorable business environment. Author Affiliation: Yale-NUS College, Singapore Article History: Received 19 August 2018; Revised 8 April 2021; Accepted 12 April 2021 (footnote)[white star] I thank Gerard Padro for his continued guidance and support. I am grateful to Maria Petrova (the Editor) and three anonymous referees for many insightful comments. I also thank Zhewei Foo for her excellent research assistance. Finally, thanks to James Kung, Yu Qin and Hongjia Zhu for their generosity in sharing data. This paper has also benefited from discussions with Shiyu Bo, Robin Burgess, Shawn Chen, Eugene Choo, Ray Fisman, Pei Gao, Georg Graetz, Jean-Denis Garon, Hanwei Huang, Sanjay Jain, Gabriel Leon, Guy Michaels, Alan Manning, Stephen Maurer, Steve Pischke, Ronny Razin, Sahar Parsa, Alwyn Young, Shuang Zhang and seminar participants from the Asian Meeting of the Econometric Society, Academia Sinica, Australia National University, China Economic Summer Institute, CUNEF, Fudan University, IIPF, Jinan University, LSE, National Taiwan University, NBER Chinese Economy meeting, NEUDC, SHUFE, NYU Shanghai, University of Navarra, Trinity College Dublin and Yale-NUS college. This work was supported by Tan Chin Tuan Chinese Culture & Civilization Programme and Yale-NUS College through CRP18-RG102. Any views expressed and any mistakes are my own. Byline: Yu-Hsiang Lei [yuhsiang.lei@yale-nus.edu.sg]

Keywords Permit markets; Dynamic games; Green technology investments Highlights * Investigates the effect of linking non-cooperative emission permit markets. * Main finding: Linking may decrease emissions and increase welfare. * Indicates a way forward towards lower global emissions. Abstract This paper presents a novel benefit of linking emission permit markets. We let countries issue permits non-cooperatively, and with endogenous technology we show there are environmental benefits from permit trade even if countries are identical. Linking the permit markets of different countries will turn permit issuance into intertemporal strategic complements. The strategic complementarity arises because issuing fewer permits today increases investments in green energy capacity in all permit market countries, and countries with a higher green energy capacity will respond by issuing fewer permits in the future. Hence, each country faces incentives to withhold emission permits when permit markets are linked. Author Affiliation: (a) Dept. of Economics, University of Oslo, Moltke Moes vei 31, 0851 Oslo, Norway (b) Menon Economics, Norway * Corresponding author. Article History: Received 29 April 2020; Revised 5 March 2021; Accepted 9 March 2021 (footnote)[white star] The paper has benefited from the advice of Joseph S. Shapiro and anonymous referees. We also want to thank Geir Asheim, Emmanuelle Auriol, Jessica Coria, Nils Christian Framstad, Mads Greaker, Bård Harstad, Michael Hoel, Bjart Holtsmark, Matti Liski, Halvor Mehlum, Knut Einar Rosendahl and Karen Helene Ulltveit-Moe for helpful comments. Helpful comments were also received from seminar participants at the 2013 BEER conference, the 2013 annual meeting of EAERE, the 2013 EEA meeting, the 2013 CREE workshop, the 2014 IPWSD at Columbia, the 3rd Canadian PhD Early Career Workshop in Environmental Economics & Policy, the 2015 CESifo Area Conference on Energy and Climate Economics, the 2017 Lindau Meeting on Economic Sciences, the 2018 WCERE pre-congress event Frontiers on Research on Carbon Markets and CBS Inequality Platform's 1st Workshop on Climate Change and Inequality, 2019. While carrying out this research, the authors have been associated with the Centre of Equality, Social Organization and Performance (ESOP) at the Department of Economics at the University of Oslo and the Oslo Centre for Research on Environmentally Friendly Energy (CREE). Byline: Katinka Holtsmark [k.k.holtsmark@econ.uio.no] (a,*), Kristoffer Midttømme [kristoffer@menon.no] (b)

Keywords Rewards; Positive incentives; Persistence; Spillovers; Tax compliance; Public goods; Public policy Highlights * A Municipality of Argentina organized a lottery for individuals that have complied with their property tax * About 400 winners were randomly selected, publicly recognized and awarded a prize: the construction of a new sidewalk. * Lottery announcement induces very few additional taxpayers to pay delinquent bills. * Winning the lottery has a large positive and persistent effect on tax compliance. * There are sizable spillover effects as neighbors of lottery winners increase their overall compliance as well. Abstract Positive inducements and rewards have become a popular tool of tax administrations around the world. Yet, evaluation of the impact of rewards has been mostly absent from the empirical literature on tax compliance. In this paper we evaluate the effect of positive rewards on property tax compliance by exploiting a natural experiment in which a municipality of Argentina randomly selected 400 individuals among more than 72,000 taxpayers who had complied with the payment of their property tax. These individuals were publicly recognized and awarded the construction of a sidewalk. Results indicate that: (i) few additional taxpayers pay delinquent bills in order to participate; (ii) winning the lottery has large positive and persistent effects; (iii) there are sizable spillover effects, as neighbors of lottery winners increase their overall compliance. Providing a durable and visible public good seems to bring lasting positive effects on tax compliance. Author Affiliation: (a) George Washington University, United States (b) George Mason University, United States (c) Inter-American Development Bank, United States * Corresponding author. Article History: Received 31 October 2018; Revised 16 March 2021; Accepted 29 March 2021 (footnote)[white star] We would like to thank the Editor and two anonymous referees for their comments and engagement with the paper. We also thank Martin Ardanaz, Pamela Jakiela, Phil Keefer, Giulia Mascagni, Christian Traxler and seminar participants at the National Tax Association Annual Conference in Baltimore, the Experimental Seminar at ICES-GMU, the World Bank's ABCDE 2016 Conference, the 4th TARC Workshop at the University of Exeter, the Institute of Development Studies at the University of Sussex, and the University of British Columbia for their comments and suggestions. The authors are extremely grateful to the authorities of the City of Santa Fé for providing their administrative data and to the team headed by Lucio Castro at CIPPEC for their assistance during data collection. We also thank for its financial support the Institutional Capacity Strengthening Fund (ICSF) of the Inter-American Development Bank, funded by the Government of the People's Republic of China, and the Public Capacity Building Fund (KPC) of the Inter-American Development Bank, funded by the Government of the Republic of Korea. The opinions presented herein are those of the authors and thus do not necessarily represent the official position of the institutions to which they belong. Byline: Paul E. Carrillo [pcarrill@gwu.edu] (a,*), Edgar Castro [ecastrom@gmu.edu] (b), Carlos Scartascini [carlossc@iadb.org] (c)

JEL H21; E24; E64; J31 Highlights * We study supply-side optimal capital taxation with endogenous wage inequality in a general equilibrium economy with a continuum of heterogeneous laborers. We allow for arbitrary complementarity or substitutability between capital inputs and different kinds of labour inputs. Thus, relative wages endogenously evolve with the accumulation of capital. Under this setting, we study both uniform capital income tax (UCIT) and sector-specific capital income tax (SCIT) and demonstrate interactions between optimal labor and capital income taxes. * We first demonstrate that differential capital tax, based on capital's effect on skill premiums, is desirable even in the steady state, while nonlinear capital tax is not desirable under an additively separable utility function. * We then show that a type of capital should be taxed if skill premium increases with the accumulation of the capital. Otherwise, it should be subsidized. Moreover, we find that SCIT is generally needed to implement the second-best allocation, which means that optimal capital tax rate varies with sectors (industry or firm) and full production efficiency is not optimal. If sectoral wage increases with the sectoral capital input, optimal SCIT is positive (negative) for the high-income (non-high-income) sectors. * A numerical application to U.S. taxation is provided. The optimal UCIT rate on equipment capital amounts to a net return tax rate ranging from 24.1% to 36.5%. This is lower than the effective tax rate in the United States (37.1%). However, the top SCIT amounts to a net return tax of 45.9%. Interestingly, there is an inverted U-shaped relationship between the SCIT rate and the sectoral wage. The higher the elasticity of substitution between skills, the higher (lower) the SCIT on the top-income (lowest-income) section. * Switching from UCIT to SCIT is done to compress wage gaps between the top ten percent and the others. It especially favors the median-income individuals whose wages are increased as high as 3.8%. Meanwhile, the labor demand is increased by 1.7%~5.1%. Due to production inefficiency, switching from UCIT to SCIT implies small welfare gains (0.07%~0.22% in consumption-equivalent terms). Abstract In a model with a continuum of imperfectly substitutable laborers and endogenous skill premiums, this paper derives optimal tax formulas as functions of social welfare weights and a small set of estimable statistics. It first demonstrates that differential capital tax, based on capital's effect on skill premiums, is desirable even in the steady state, while nonlinear capital tax is not desirable under an additively separable utility function. It then explores both uniform and sector-specific capital income tax (UCIT and SCIT), with a sector corresponding to a type of laborer. Numerical application to U.S. taxation delivers an inverted U-shaped relationship between the SCIT rate and sectoral wage. The optimal SCIT rate on the top-income sectors increases with the elasticity of substitution between the sectoral products and amounts to a net return tax of 45.9%. Reform from UCIT to SCIT compresses wage gaps between the top ten percent and others considerably. It especially favors the median-income individuals whose wages are increased as high as 3.8%. Due to production inefficiency, switching from UCIT to SCIT implies small welfare gains (0.07%~0.22% in consumption-equivalent terms). Author Affiliation: (a) School of Economics, Peking University, China (b) Guanghua School of Management, Peking University, and Beijing Technology and Business University, China (c) School of Public Finance and Taxation, Zhongnan University of Economics and Law, China * Corresponding author. Article History: Received 5 December 2018; Revised 15 March 2021; Accepted 29 March 2021 (footnote)[white star] We appreciate Chunyang Fu, Jonathan Hamilton, Yi Lu, Wojciech Kopczuk, Dominik Sachs, Florian Scheuer, Chan Wang, Binzhen Wu, Xi Weng and Kezhong Zhang for very useful comments. We also thank Qian Li, Shian-Jang Tzeng, Yaohong Zhao, as well as our colleagues and seminar participants in the Key Laboratory of Mathematical Economics and Quantitative Finance in Peking University, the China Summer Institute of Public Economics hosted by the School of Economics and Management, Tsinghua University, 567 seminar and the China Labor Forum. The first draft of this paper is written when Wenjian is at the Peking University. Finally, we are especially grateful to the referees and editor for their encouragement and constructive and detailed guidance, from which this paper benefited tremendously. We acknowledge financial support from the National Natural Science Foundation of China (Grant No. 72003198), the National Social Science Foundation of China (Grant No. 19ZDA069), the WU Jiapei Award for Information Economics in 2016, and the Innovation and Talent Base for Income Distribution and Public Finance (B20084). The authors are listed in alphabetical order and contributed equally to the paper. Byline: Xiaoyong Cui [cuixiaoyong@pku.edu.cn] (a), Liutang Gong [ltgong@gsm.pku.edu.cn] (b), Wenjian Li [wenjian_li@live.com] (c,*)

Keywords Wage regulation; Decentralization; Teacher labor market Highlights * Pay decentralization leads to wages that better align with local market conditions. * These wage effects have no impact on teachers or students. * However, they have suggestive spillover effects to wages in substitute occupations. Abstract This paper presents new evidence on the labor market effects of wage decentralization, exploiting a Swedish reform that replaced the fixed national pay scale for teachers with individual wage bargaining. The paper provides three sets of results. First, I show that the reform significantly changed the wage structure of teachers. Second, I demonstrate that these wage changes did not impact teacher retention, recruitment, or composition, and did not affect student outcomes. Finally, I provide suggestive evidence of a wage spillover effect to substitute occupations. I propose that the suggestive spillover effect helps explain the null results on teacher and student outcomes. Author Affiliation: Department of Economics, Norwegian School of Economics, Norway Article History: Received 5 April 2020; Revised 12 February 2021; Accepted 16 February 2021 (footnote)[white star] I wish to thank Anders Böhlmark, Maria Fitzpatrick, Jordan Matsudaira and Michael Lovenheim for their advice and support. Francine Blau, David Jaume, Lawrence Kahn, Katrine Løken, Douglas Miller, Zhuan Pei, Kjell Salvanes, Amy Schwartz, Bertil Tunggodden, Björn öckert, Barton Willage, and seminar participants at several conferences and workshops, provided extremely helpful comments. I would further like to thank Pia Murphy at the Swedish Association of Local Authorities and Regions for providing detailed documentation on the centralized teacher wage negotiations that took place prior to the reform. I also thank Mimmi Råback and Jenny Davidsson at Lärarförbundet for information on the teacher wage scales prior to the reform. I gratefully acknowledge financial support from the Dr. Tech. Marcus Wallenberg Foundation [2015--040], the Cornell University Graduate School and the Research Council of Norway [FAIR project no. 262675]. Byline: Alexander Willén [alexander.willen@nhh.no]

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jpubeco.2017.06.008 Byline: Xin Long, Alessandra Pelloni Abstract: We consider the optimal factor income taxation in a standard R&D model with technical change represented by an increase in the variety of intermediate goods. In the model there are externalities both to working and to saving, due to market power by firms, incomplete appropriability of the benefits of inventions and the cost of economic activity in terms of public expenditures. Redistributing the tax burden from labor to capital will increase employment but, in most cases, reduce the rate of growth, with conflicting effects on the deadweight loss from the externalities. Under plausible calibrations of the model, the optimal tax rate on capital will be sizable. Article History: Received 13 May 2013; Revised 23 June 2017; Accepted 26 June 2017 Article Note: (footnote) [star] We are grateful to three anonymous referees for their guidance in improving the paper. We wish to thank Barbara Annicchiarico, Costas Azariadis, Thomas Davoine, Lei Ji, Pietro Peretto, Xavier Sala-i Martin, Marika Santoro, Pedro Teles, Robert Waldmann, Joseph Zeira and participants in seminars and presentations (Asset 2014 Aix-en-Provence, Manchester 2014, Sophia Antipolis 2013, Barcelona 2013, Padua 2011, LAGV Marseille 2011, DEGIT Frankfurt 2010, SIE Catania 2010 and RCEA Rimini 2009) for comments received on previous versions of the paper. The first was titled 'Welfare Improving Taxation on Saving in a Growth Model' (University of Teramo, Department of Communication, WP 71, 2011).

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jpubeco.2017.07.007 Byline: Marcel Garz, Jil S?rensen Abstract: This paper studies the effect of news media on the probability of resigning from office of politicians being subject to criminal investigation. Using data on cases in which the political immunity of German representatives was lifted, we find that resignations are more common when the media covers the case intensely. The amount of this news coverage, in turn, depends on the availability of other newsworthy, exogenous events. Therefore, we instrument for coverage of liftings of immunity with the overall news pressure. We estimate the causal effect and find that a change from no coverage to the mean coverage increases the likelihood of resignation by 6.4 percentage points. The effect is likely driven by the crowding out of reports on politicians with the same ideology as the newspaper, rather than reports on representatives with different political leanings. There is no evidence that the reporting affects the chances of conviction. Article History: Received 13 September 2016; Revised 21 July 2017; Accepted 26 July 2017 Article Note: (footnote) [star] We thank participants at the 2015 Economics of Media Bias Workshop, the 2016 Lisbon Meeting on Institutions and Political Economy, the 2016 Conference of the European Public Choice Society, the 2016 Conference of the German Economic Association, and the 2017 Conference on the Political Economy of Democracy and Dictatorship, as well as the co-editor Brian Knight and two anonymous referees, for their very helpful comments and suggestions. We are also grateful to Spiegel Publishing for providing access to its newspaper archives. The views expressed in this paper are those of the author(s) and do not necessarily represent those of Hamburg Media School.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jpubeco.2017.06.010 Byline: Makoto Hasegawa, Kozo Kiyota Abstract: In an increasingly globalized world, the design of international tax systems in terms of the taxation of foreign corporate income has attracted much attention from policy makers and economists alike. In the past, Japan's worldwide tax system taxed foreign source income upon repatriation. However, to stimulate dividend repatriations from Japanese-owned foreign affiliates, the Japanese government introduced a foreign dividend exemption system in 2009 that exempted dividends remitted by Japanese-owned foreign affiliates to their parent firms from home-country taxation. This paper examines the effect of this dividend exemption system on profit repatriation by Japanese multinationals. We find that the response of Japanese-owned affiliates to the dividend exemption was heterogeneous. More particularly, foreign affiliates with a large stock of retained earnings were generally more responsive to the reform and significantly increased dividend payments to their parent firms in response to the enactment of the dividend exemption system. Dividend payments by these affiliates also became more sensitive to withholding tax rates on dividends levied by host countries under the new exemption system. Article History: Received 10 August 2015; Revised 20 June 2017; Accepted 28 June 2017 Article Note: (footnote) [star] This paper is part of research project 'Determinants of the Productivity Gap among Firms in Japan,' undertaken at the Research Institute of Economy, Trade and Industry (RIETI) and an extension of a chapter in Hasegawa's doctoral dissertation. The study utilizes the micro data underlying the Basic Survey of Japanese Business Structure and Activities and the Basic Survey of Overseas Business Activities conducted by the Ministry of Economy, Trade and Industry (METI), and uses the Kikatsu-Kaiji converter provided by the RIETI. Hasegawa is especially grateful to the members of his dissertation committee -- Joel Slemrod, James Hines, Stephen Salant, and Jagadeesh Sivadasan -- for their invaluable advice, encouragement, and mentoring. We are grateful to the co-editor, Wojciech Kopczuk, and two anonymous referees for valuable comments and suggestions. We also appreciate the helpful comments and suggestions of David Albouy, Christian Gillitzer, Masaki Hotei, Arjan Lejour, Kevin Markle, Kiyoshi Matsubara, Hisahiro Naito, Tom Neubig, Kazuki Onji, Masanori Orihara, Eiji Tajika, and Ryuhei Wakasugi, along with the seminar participants at the University of Michigan, the 2013 National Tax Association Annual Meeting and the 2014 International Institute of Public Finance Annual Congress. Hasegawa gratefully acknowledges the financial support of the Nomura Foundation, the University of Michigan, the National Graduate Institute for Policy Studies, and the Japan Society for the Promotion of Science (JSPS) through KAKENHI grant nos. JP26780172 and JP16H03610. Kiyota also acknowledges the financial support of the JSPS through KAKENHI grant nos. JP26220503 and JP26285058. The usual disclaimers apply.

Keywords Consumption; Spending; Liquidity; Fiscal policy; Marginal propensity to spend; Account data; Naturally-occurring data Abstract Using comprehensive account records, this paper examines how individuals adjusted spending and saving in response to a temporary drop in liquidity due to the 2013 U.S. government shutdown. The shutdown cut paychecks by 40% for affected employees, which was recovered within 2 weeks. Because the shutdown affected only the timing of payments, it provides a distinctive experiment allowing estimates of the response to a liquidity shock holding income constant. Spending dropped sharply, implying a naive estimate of 58 cents less spending for every dollar of lost liquidity. This estimate overstates the consumption response. While many individuals had low liquid assets, they used multiple sources of short-term liquidity to smooth consumption. Sources of short-term liquidity include delaying recurring payments such as for mortgages and credit card balances. Author Affiliation: (a) Robert Day School of Economics and Finance, Claremont McKenna College, Claremont, CA 91711, United States of America (b) Department of Economics, University of California, Berkeley, Berkeley, CA 94720, United States of America (c) Department of Economics, University of Michigan, Ann Arbor, MI 48109, United States of America (d) Department of Economics, Arizona State University, Tempe, AZ 85287, United States of America (e) Haas School of Business, University of California, Berkeley, Berkeley, CA 94720, United States of America (f) NBER, United States of America * Corresponding author at: Department of Economics, University of Michigan, Ann Arbor, MI 48109, United States of America. Article History: Received 13 June 2017; Revised 7 June 2018; Accepted 14 June 2018 (footnote)[white star] A previous version of this paper was circulated under the title 'How Individuals Smooth Spending: Evidence from the 2013 Government Shutdown Using Account Data.' We thank Kyle Herkenhoff, Patrick Kline, Dimitriy Masterov, Melvin Stephens Jr., and Jeffrey Smith as well as participants at many seminars for helpful comments. We are also grateful to the editor and three referees for thoughtful comments on an earlier draft. This research is supported by a grant from the Alfred P. Sloan Foundation (G-2014-13618). Shapiro acknowledges additional support from the Michigan node of the NSF-Census Research Network (NSF SES 1131500). Byline: Michael Gelman [mgelman@cmc.edu] (a), Shachar Kariv [kariv@berkeley.edu] (b), Matthew D. Shapiro [shapiro@umich.edu] (c,f,*), Dan Silverman [Daniel.Silverman.1@asu.edu] (d,f), Steven Tadelis [stadelis@berkeley.edu] (e,f)

Keywords Consumption; Great Recession; House prices; Household balance sheet; Non-durable expenditures; Replication; Wealth effect Abstract In an influential paper, Mian, Rao, and Sufi (2013) exploit geographic variation to measure the effect of the fall in housing net worth on household expenditures during the Great Recession. Their widely-cited estimates are based on proprietary house price and proprietary expenditure data and therefore not easily replicable. We use alternative data on a subset of non-durable goods and on house prices, which are more easily accessible, to replicate their study. When estimating their same specification on our data, we obtain values for the elasticity of expenditures to the housing net worth shock that are virtually indistinguishable from theirs. However, our robustness analyses with respect to alternative model specifications yield more nuanced conclusions about the separate roles of house prices and initial housing exposure/leverage for the drop in expenditures. Moreover, the estimated elasticity is consistent, theoretically and quantitatively, with a simple calibrated model with wealth effects where leverage and credit constraints play no role. Author Affiliation: (a) University of Chicago, United States of America (b) NBER, United States of America (c) IIES, Sweden (d) CEPR, United Kingdom (e) IZA, Germany (f) Princeton University, United States of America (g) IFS, United Kingdom of Great Britain and Northern Ireland * Corresponding author. Article History: Received 29 June 2017; Revised 10 March 2020; Accepted 10 March 2020 (footnote)[white star] We thank Emi Nakamura and Amir Sufi for their detailed comments on an earlier version of the paper. Byline: Greg Kaplan [gkaplan@uchicago.edu] (a,b), Kurt Mitman [kurt.mitman@iies.su.se] (c,d,e), Giovanni L. Violante [violante@princeton.edu] (f,d,g,e,b,*)

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jpubeco.2017.02.002 Byline: Maja Adena, Steffen Huck Abstract: Is there a way of matching donations that avoids crowding out? We introduce a novel matching method where the matched amount is allocated to a different project, present some simple theoretical considerations that predict reduced crowding out or crowding in (depending on the degree of substitutability between the two projects) and present evidence from a large-scale natural field experiment and a laboratory experiment. Similar to findings in the literature, conventional matching for the same project results in partial crowding out in the field experiment and, as predicted, crowding out is reduced under the novel matching scheme. The lab experiment provides more fine-tuned evidence for the change in crowding and yields further support for the theory: the novel matching method works best when the two projects are complements rather than substitutes. Article History: Received 12 March 2016; Revised 29 November 2016; Accepted 8 February 2017 Article Note: (footnote) [star] We thank all those at the Frankfurt Opera House, actori, and the Berlin branch of Ingenieure ohne Grenzen for making this project possible. This paper has been screened to ensure no confidential information is revealed. We thank Imran Rasul, participants at EEA Meeting, VfS Jahrestagung, BBE Seminar, IMEBESS, numerous visitors at the WZB, the editor Wojciech Kopczuk, and anonymous referees for providing insightful comments on the project and paper. We thank Nina Bonge and Jana Wittig for excellent research assistance.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jpubeco.2017.02.003 Byline: Michael Hallsworth, John A. List, Robert D. Metcalfe, Ivo Vlaev Abstract: This paper presents results from two large-scale natural field experiments that tested the effect of social norm messages on tax compliance. Using administrative data from >200,000 individuals in the United Kingdom, we show that including social norm messages in standard reminder letters increases payment rates for overdue tax. This result offers a rare example of social norm messages affecting tax compliance behavior in a real world setting. We find no evidence that loss framing is more effective than gain framing. Descriptive norms appear to be more effective than injunctive norms. Messages referring to public services or financial information also significantly increased payment rates. The field experiments accelerated the collection of tax revenue at little cost. Article History: Received 21 March 2015; Revised 30 November 2016; Accepted 8 February 2017 Article Note: (footnote) [star] We would like to thank the Editor and two referees for thoughtful comments that improved the paper considerably. We would like to thank Her Majesty's Revenue and Customs, the UK Cabinet Office's Behavioural Insights Team (now The Behavioural Insights Team), and TNS BMRB. In particular: Pedro Wrobel, Nick Down, David Halpern, Jackie Simms, Lesley Titley, Matt Cole, Dawn Reade, Simon Bradford, Mike Holgate, Bob Appleton, Gordon Smith, Graham Brammer, Mike Drewery, Michelle Harrison, and Ara Darzi. We thank David Novogordsky for his research support. We are grateful for the comments given by seminar participants at IFS-UCL, UCSD, Georgia State University, University of Wyoming, the 1st International Conference on Public Policy, the AEA/ASSA 2014 conference, and the 2014 FAU Taxation, Social Norms and Compliance conference; and those given by Hunt Allcott, James Alm, Stefano DellaVigna, Greer Gosnell, Erich Kirchler, Steven Levitt, Mark Phillips, Michael Price, Steven Sheffrin, and Richard Thaler. The views expressed are those of the authors, and cannot be attributed to H.M. Revenue and Customs, the Cabinet Office, or H.M. Government.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jpubeco.2017.01.001 Byline: Shawn Xiaoguang Chen Abstract: This paper investigates the impact of the abolition of the agricultural taxes in 2005 across China on county governments' incentives for tax enforcement. I show that the revenue loss of county governments was largely offset by tougher tax enforcement. The incentive for VAT enforcement can be weakened, however, if the county: (1) receives a lower share of total VAT revenues; (2) has a broader VAT tax base; or, (3) has more abundant sources of revenue from land sales. These findings suggest that incentives of local governments can be vital to tax enforcement and to the tax capacity of a country. Article History: Received 16 September 2015; Revised 9 January 2017; Accepted 12 January 2017 Article Note: (footnote) * The author is grateful to Francesco Caselli and Camille Landais for their supervision, and especially thankful to Claus Thustrup Kreiner (the co-editor), three anonymous referees, Tim Besley, Henrik Kleven, Robin Burgess, Miguel Almunia, and John Sutton for their comments and suggestions. Acknowledgements go to Peter Robertson, Ken Clements, Christopher Parsons, Michael Jetta, Johannes Spinnewijn, Torsten Persson, Roger Gordon, Ethan Ilzetzki, Steve Pischke, Frank Cowell, Ronny Razin, Guy Michaels, Ximin Yue for their suggestions. The author also appreciates the feedback from participants in Work-in-Progress Seminars on Public Economics, Macroeconomics and Labour at LSE, seminars at Renmin University of China, Xiamen University, Chinese Academy of Social Sciences, the University of Hongkong, and benefits from discussion with Qingwang Guo, Qing Zhu, Shumin Yue, Xiaoyong Cui, Bingyang Lv, Junxue Jia, Gang Xia, Moru Yang, and Jing Zhang. Special thanks to Heng Yin and Liutang Gong for data supports, and to Chiwa Yuen for unfailing help. The author, of course, bears the responsibility for any errors in the paper.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jpubeco.2016.12.002 Byline: George Bulman Abstract: There is a great deal of policy interest in reducing college dropout rates, increasing graduation rates, and improving labor market outcomes. To this end, individual colleges and state university systems use high school grade point averages and class rankings in an effort to offer admission and scholarships to students who are most likely to achieve long-run success. However, a significant fraction of students exhibit steep positive or negative performance trends during high school. This study shows that academic performance in later grades is given no greater weight in admissions but is the best predictor of college and labor market outcomes, greatly exceeding prior grades and entrance exam scores. Placing greater weight on later grades and extending application deadlines to allow the consideration of 12th grade performance is shown to significantly alter which students are admitted to college and to improve their expected long-run outcomes. Importantly, weighting recent performance does not appear to affect college diversity. Evidence is presented that the predictive power of later grades is driven primarily by students who experience large negative performance trajectories during high school. Article History: Received 20 April 2016; Revised 30 November 2016; Accepted 6 December 2016 Article Note: (footnote) * This research was supported by the Hawley-Shoven Fellowship and the Kapnick Fellowship through the Stanford Institute for Economic and Policy Research. I thank the Florida Department of Education for providing the data used in this analysis and Jonathan Blakely in particular for his assistance. The paper benefited substantially from comments by two anonymous referees. The opinions expressed in this paper do not necessarily reflect those of the Stanford Institute for Economic Policy Research or the Florida Department of the Education. Any remaining errors are my own.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jpubeco.2016.11.007 Byline: Yulia (Paramonova) Kuchumova Abstract: Despite the widespread recognition of the effectiveness of information reporting to increase tax compliance, existing tax theory considers tax audits to be the only tool to prevent evasion. This paper extends tax theory by modeling information reporting as an additional enforcement instrument that allows a tax authority to acquire signals about taxpayers' income. The paper rigorously characterizes the optimal strategy to maximize tax revenue when enforcement resources are limited. It determines the optimal allocation of resources between audits and information reporting, which is governed by how effectively the signals facilitate audit targeting. The model demonstrates that the value of information reporting declines with audit coverage because of the corresponding decline in the value of audit targeting. The optimal level of information reporting is an inverse U-shaped function of the budget allocated to enforcement, while the optimal audit coverage always increases with the budget. This finding implies that at some point it may not be optimal to expand information reporting. Article History: Received 11 July 2013; Revised 6 October 2016; Accepted 8 November 2016