We extend the standard, one-period model of tax evasion to an inter-temporal framework in which a... more We extend the standard, one-period model of tax evasion to an inter-temporal framework in which an expected-utility-maximizing taxpayer updates expectations about the probability of a future audit based on past audit experience. This framework provides a theoretical grounding for the empirical evidence indicating that tax evasion is affected by taxpayers' perceptions of audit probabilities and is influenced by taxpayers' prior audit experience. We show that for a variety of risk preferences, Bayesian updating increases present and expected future tax evasion and reduces tax payments, inclusive of expected fines. These findings call into question the usefulness of Internal Revenue Service secrecy about audit probabilities for raising taxpayer compliance and expected tax revenue.
... market ERIC W. STONE and RONALD S. WARREN, JR Department of Economics, University of Georgia,... more ... market ERIC W. STONE and RONALD S. WARREN, JR Department of Economics, University of Georgia, Athens, GA 30602, USA ... GUARD 0.411 0.436 0.384 Equals 1 if player's position is guard FORW ARD 0.388 0.368 0.408 Equals 1 if player's position is forward ...
We examine the economic consequences of an 1886 reform in Massachusetts that mandated the weekly ... more We examine the economic consequences of an 1886 reform in Massachusetts that mandated the weekly payment of wages. We derive conditions on key elasticities of labor supply that determine the qualitative effects of the reform on workers’ effective wages and utility. We match census and administrative data on workers in a Lowell textile mill for a period encompassing the switch from monthly to weekly payment. Empirical estimates of a labor supply equation imply that the reform increased workers’ effective wage rates and welfare. The reform also decreased the mill workers’ average wage, as predicted by the theory of compensating differentials.
... Christopher M. Cornwell University of Georgia Karen L. Tinsley University of Georgia ... Note... more ... Christopher M. Cornwell University of Georgia Karen L. Tinsley University of Georgia ... Noteworthy contributions to the analyses of these issues include Datcher [1982], Behrman and Taubman [1985], Case and Katz [1991], Card and Krueger [1992], and Neal and Johnson [1996]. ...
We show that an increase in taxpayer uncertainty about the amount of tax evasion that will be det... more We show that an increase in taxpayer uncertainty about the amount of tax evasion that will be detected if an audit is undertaken increases compliance for prudent taxpayers if they believe that they will be assessed at least the amount of tax evaded. Thus, a policy that fosters detection uncertainty is more likely to encourage compliance the higher is the penalty for tax evasion.
We analyze the factors that influence the length of a completed spell of sheltered homelessness, ... more We analyze the factors that influence the length of a completed spell of sheltered homelessness, using administrative data on individuals who stayed in a large regional homeless shelter. We develop a model of homelessness which provides the basis for inferences made from our estimated model. Our estimates provide some support for the predictions of the model and reveal a variety of individual-specific characteristics that increase the length of stay in the shelter. These include the presence of a medical condition, recent release from an institution, a family crisis, age, and gender. We find no evidence that either a history of drug abuse or mental illness has a statistically significant effect on the rate of exit from the shelter. Our results are then used to draw some tentative policy recommendations.
We derive a general analytic formula for the marginal welfare cost (MWC) of public funds without ... more We derive a general analytic formula for the marginal welfare cost (MWC) of public funds without imposing restrictive assumptions on preferences or technologies. The framework encompasses the various special cases previously considered, and reconciles the disparities among the reported estimates of MWC. Unresolved differences in existing estimates are fully explained by appropriate interpretations of intended thought experiments and alternative assumptions about the elasticity of labor supply with respect to public spending. Further progress in measuring MWC requires empirical estimation of labor-supply functions that include government spending as an explanatory variable.
This paper presents evidence on the degree of returns to scale in the labor market, using a trans... more This paper presents evidence on the degree of returns to scale in the labor market, using a transcendental logarithmic model of the labor-market matching technology. The empirical results imply (locally) increasing returns to scale, and are consistent with multiple equilibria, thereby suggesting a potentially welfare-enhancing role for macroeconomic policy intervention.
We extend the standard, one-period model of tax evasion to an inter-temporal framework in which a... more We extend the standard, one-period model of tax evasion to an inter-temporal framework in which an expected-utility-maximizing taxpayer updates expectations about the probability of a future audit based on past audit experience. This framework provides a theoretical grounding for the empirical evidence indicating that tax evasion is affected by taxpayers' perceptions of audit probabilities and is influenced by taxpayers' prior audit experience. We show that for a variety of risk preferences, Bayesian updating increases present and expected future tax evasion and reduces tax payments, inclusive of expected fines. These findings call into question the usefulness of Internal Revenue Service secrecy about audit probabilities for raising taxpayer compliance and expected tax revenue.
... market ERIC W. STONE and RONALD S. WARREN, JR Department of Economics, University of Georgia,... more ... market ERIC W. STONE and RONALD S. WARREN, JR Department of Economics, University of Georgia, Athens, GA 30602, USA ... GUARD 0.411 0.436 0.384 Equals 1 if player's position is guard FORW ARD 0.388 0.368 0.408 Equals 1 if player's position is forward ...
We examine the economic consequences of an 1886 reform in Massachusetts that mandated the weekly ... more We examine the economic consequences of an 1886 reform in Massachusetts that mandated the weekly payment of wages. We derive conditions on key elasticities of labor supply that determine the qualitative effects of the reform on workers’ effective wages and utility. We match census and administrative data on workers in a Lowell textile mill for a period encompassing the switch from monthly to weekly payment. Empirical estimates of a labor supply equation imply that the reform increased workers’ effective wage rates and welfare. The reform also decreased the mill workers’ average wage, as predicted by the theory of compensating differentials.
... Christopher M. Cornwell University of Georgia Karen L. Tinsley University of Georgia ... Note... more ... Christopher M. Cornwell University of Georgia Karen L. Tinsley University of Georgia ... Noteworthy contributions to the analyses of these issues include Datcher [1982], Behrman and Taubman [1985], Case and Katz [1991], Card and Krueger [1992], and Neal and Johnson [1996]. ...
We show that an increase in taxpayer uncertainty about the amount of tax evasion that will be det... more We show that an increase in taxpayer uncertainty about the amount of tax evasion that will be detected if an audit is undertaken increases compliance for prudent taxpayers if they believe that they will be assessed at least the amount of tax evaded. Thus, a policy that fosters detection uncertainty is more likely to encourage compliance the higher is the penalty for tax evasion.
We analyze the factors that influence the length of a completed spell of sheltered homelessness, ... more We analyze the factors that influence the length of a completed spell of sheltered homelessness, using administrative data on individuals who stayed in a large regional homeless shelter. We develop a model of homelessness which provides the basis for inferences made from our estimated model. Our estimates provide some support for the predictions of the model and reveal a variety of individual-specific characteristics that increase the length of stay in the shelter. These include the presence of a medical condition, recent release from an institution, a family crisis, age, and gender. We find no evidence that either a history of drug abuse or mental illness has a statistically significant effect on the rate of exit from the shelter. Our results are then used to draw some tentative policy recommendations.
We derive a general analytic formula for the marginal welfare cost (MWC) of public funds without ... more We derive a general analytic formula for the marginal welfare cost (MWC) of public funds without imposing restrictive assumptions on preferences or technologies. The framework encompasses the various special cases previously considered, and reconciles the disparities among the reported estimates of MWC. Unresolved differences in existing estimates are fully explained by appropriate interpretations of intended thought experiments and alternative assumptions about the elasticity of labor supply with respect to public spending. Further progress in measuring MWC requires empirical estimation of labor-supply functions that include government spending as an explanatory variable.
This paper presents evidence on the degree of returns to scale in the labor market, using a trans... more This paper presents evidence on the degree of returns to scale in the labor market, using a transcendental logarithmic model of the labor-market matching technology. The empirical results imply (locally) increasing returns to scale, and are consistent with multiple equilibria, thereby suggesting a potentially welfare-enhancing role for macroeconomic policy intervention.
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