Matthew Weinzierl, 24 September 2016

Tax policy to correct inequality assumes that nobody is entitled to advantages due to luck alone. But the public largely rejects complete equalisation of 'brute luck' inequality. This column argues that there is near universal public support for an alternative, benefit-based theory of taxation. Treating optimal tax policy as an empirical matter may help us to close the gap between theory and reality.

Giacomo De Giorgi, Anders Frederiksen, Luigi Pistaferri, 17 September 2016

Household consumption can be influenced by the consumption behaviour of peers. This column examines why this is the case, and considers some policy implications. The tendency for individuals to under-save (or over-borrow) in an attempt to ‘keep up with the Joneses’ appears to be driven by the average consumption of their peers, rather than by the consumption of conspicuous items. If tax policy fails to consider these peer effects, it risks wrongly estimating the effects of tax reforms that target certain groups.

Douglas Campbell, Lester Lusher, 08 September 2016

Growing inequality has been one of the most pressing political issues since the Great Recession. However, there is a relative lack of consensus on the significant drivers of this trend. This column investigates the contribution of globalisation, via international trade, to US inequality. Although trade is found to have had important effects on certain parts of the US labour market in the early 2000s, the growth in US inequality since 1980 can be traced back to Reagan-era tax cuts.

Philippe Aghion, Ufuk Akcigit, Julia Cagé, William Kerr, 29 August 2016

The relationship between taxation and economic growth is complex, and relies in large part on the efficiency with which taxes are used. This column examines the impact of corruption on this relationship. The boost to welfare from reducing corruption is substantially larger than the marginal gains from optimising the tax rate for an existing level of government efficiency.

Heiner Schumacher, Iris Kesternich, Michael Kosfeld, Joachim Winter, 06 July 2016

Evidence shows that individuals often do not act in a completely selfish manner, but rather take into account the welfare of other parties when making decisions. But how decision-makers trade off costs and benefits when the costs are dispersed among many individuals is unclear. This column discusses new experimental evidence showing that a large fraction of individuals are ‘insensitive to group size’, attaching similar weights to small and large groups. These findings provide a new explanation for a number of empirical patterns, including political and medical decision-making, lobbying, tax evasion, and charity donations.

Other Recent Articles: