Research

PUBLICATIONS

Risky Business: Policy Uncertainty, Firm Valuation, and Investment 

with B. Glass

International Tax and Public Finance, 2023

We generalize previous results on the effect of non-linear taxation on investment, showing that investment decisions are distorted when tax rates are correlated with marginal productivity. We demonstrate this result in a simple theoretical framework, which can also explain some well known results on the effects of tax progressivity and tax asymmetry on investment. Time-series estimates for the post-WW2 era suggest a negative correlation between effective tax rates and total factor productivity in the U.S., yielding an effect on firm investment equivalent to an investment subsidy of around 1 percent.

PRESENTATIONS

FUNDING

Attending to Inattention: Identification of Deadweight Loss under Non-Salient Taxes 

with B. Glass

Journal of Public Economic Theory, 2020

Recent developments in behavioral public economics have shown that heterogeneous biases prevent point identification of deadweight loss. We replicate this result for an arbitrary (closed) consumption set, whereas previous results on heterogeneous attention focused on binary choice. We find that one can bound the efficiency costs of taxation based on aggregate features of demand. When individuals have linear demand functions, the bounds for deadweight loss are easy to calculate from linear regressions.

PRESENTATIONS

WORKING PAPERS

VAT Incidence in Real VAT Sytems 

with T. Velayudhan

Submitted

Previously circulated as "Does the Informal Sector Escape the VAT?"
This paper studies the price impacts of Value Added Tax (VAT) in the presence of size-based exemptions. In the Indian context, VAT is fully passed-through to consumers at registered firms, while its impact on unregistered firms varies. Consumers of unregistered firms in rural areas partially bear the burden of VAT, reducing progressivity. Output prices at unregistered firms are unaffected by input taxes, consistent with registration-based supply chain segregation. Additionally, a high registration threshold means VAT distorts product quality. We emphasize the significance of recognizing VAT's practical deviations from textbook models, particularly in developing countries, to understand its real-world implications.

PRESENTATIONS

Media coverage: VoxDev

FUNDING

€2 Gas! Tax Holidays, Incidence Heterogeneity, and Market Structure 

with L. Pessina and A. Tulli

Submitted

This study explores the impact of competition on the pass-through of a tax holiday prompted by the 2022 energy crisis on consumer prices. Italian gas stations (treatment group) and German/Spanish counterparts (controls) are the focus. Stations with fewer competitors pass on only 65% of the tax cut, compared to around 80% for those with more competition. Less competitive stations also exhibit greater pass-through variability, consistent with sustainable competitive and collusive equilibria. When same-brand stations are neighbors, facilitating collusive behavior, pass-through decreases for less competitive stations, but not for those with more rivals.

PRESENTATIONS

Tax Reform and the Valuation of Superstar Firms

Submitted

This paper measures the effect of the 2017 Tax Cuts and Jobs Act on share prices of publicly traded firms, finding that the most profitable firms, and those in concentrated industries, benefited the most. The tax bill significantly reduced corporate tax rates, thereby increasing share prices, particularly at the top. Among firms with the highest profit rates, about 65 percent rose in value upon the Senate's vote on the reform, whereas among less profitable firms, fewer than 15 percent appreciated. By many measures, stock market gains coincident with the tax bill were concentrated among firms with greater market power. This pattern is consistent with economic rents being important components of the values of large U.S. corporations.

PRESENTATIONS

FUNDING

WORK IN PROGRESS

Wait No More: How the Administration of VAT Refunds Impacts Firm Behavior 

with M. Piek and T. Velayudhan

PRESENTATIONS

FUNDING

Guess Who's Evading on Dinner: Experimental Evidence on the Incidence of Tax Evasion 

with A. Bohne and L. M. Giuffrida

PRESENTATIONS

FUNDING

DORMANT PROJECTS

The Engel Curve for Tax Preparation Services (with Y. Kaçamak, J.M. Payne, and E. Stuart)

Unintended Consequences of a Minimum Wage Hike that Never Happened

Recent theoretical and empirical evidence suggests that the effects of a minimum wage raise might be small in the short run, but sizable in the long run. I use high-frequency data from online betting markets and financial markets to study the long-term impact of minimum wage legislation on firm profits and employment. While this approach only allows me to study the impact on big firms, quoted on the stock market, it has the advantage of not relying on employment data, which is often noizy and difficult to find. Preliminary reduced-form results suggest that a 10 percentage-point increase in the odds of a minimum wage increase are associated with a 1 percentage-point decrease in the returns to stock of companies in the limited-service restaurant industry.

Altruism and the Provision of Public Goods

While one would intuitively expect that altruism helps with the problem of public good provision, anything less than a perfectly altruistic society does not provide an efficient level of public goods. In this paper I show that, in fact, it is possible that more altruism can make society worse off, in the sense that agents would be willing to give up more income to have a social planner implement the Pareto optimum, the more altruistic a society is. In future work I plan to consider how this affects welfare in an altruistic setting, compared to a setting in which agents can be "shamed" into making efficient donations to the public good. 

A General Equilibrium Model of Real-Life Value-Added Taxation (with J. Slemrod)