This document summarizes a study examining the relationship between tax rates, tax evasion, and cognitive skills. The study uses a structural model to estimate the tax elasticity of evasion between 1-3.5. It finds that individuals with higher cognitive abilities, as measured by military enlistment data, are more likely to evade taxes. The study contributes new empirical estimates of tax evasion and shows that the ability to respond to taxes through evasion differs across cognitive skill levels.
D-Branes and The Disformal Dark Sector - Danielle Wills and Tomi KoivistoCosmoAIMS Bassett
The document discusses disformal relations between the physical and gravitational geometry. It begins by introducing the most general form such a relation could take, with two arbitrary functions C and D of a scalar field and its derivative.
It then discusses how this type of relation naturally arises in many modified gravity and scalar-tensor theories. Specific examples mentioned include f(R) gravity and the Dirac-Born-Infeld (DBI) string scenario.
The document outlines how a disformal coupling could have interesting phenomenological implications and be detectable through effects on cosmology and structure formation. It concludes by stating the disformal relation is an important generalization worth further study.
The document describes a Hamiltonian with terms including Ji,j|ωiωj| and Ei|ωiωi| that depends on parameters ∆/J and ω. It studies the behavior of the system as ∆/J increases from 0 to greater than 6, including plots of the momentum distribution |P(k)|2 that show it spreading out over more values of k/k1. The dependence of the system on other parameters like α, s1, and s2 is also examined through additional plots.
Limited participation and local currency sovereign debtADEMU_Project
This document summarizes a paper that builds economic models to explain the large increase in foreign holdings of local currency emerging market sovereign debt. The paper develops models with limited market participation and different investor types to show how foreign investor entry into local currency bond markets can increase when risk aversion is low. Simulation of the models using interest rate data suggests foreign holdings of local currency debt rose strongly after the Great Recession when developed country rates fell. The paper aims to understand the implications of changing currency composition and investor composition of emerging market government debt.
This document describes pricing options using lattice models, specifically binomial trees. It provides details on:
1) Using a binomial tree to price a European call option by replicating the option payoff at each node.
2) Matching the moments of the binomial and Black-Scholes models to derive the Cox-Ross-Rubinstein (CRR) binomial tree.
3) Implementing the CRR model in C++ to price European call and put options via backward induction on the tree.
IJCER (www.ijceronline.com) International Journal of computational Engineerin...ijceronline
This document presents a method for solving fuzzy assignment problems where costs are represented by linguistic variables and fuzzy numbers. Linguistic variables are used to convert qualitative cost data into quantitative fuzzy numbers. Yager's ranking method is applied to rank the fuzzy numbers, transforming the fuzzy assignment problem into a crisp one. The resulting crisp problem is then solved using the Hungarian method to find the optimal assignment that minimizes total cost. A numerical example demonstrates the approach, showing a fuzzy cost matrix converted to crisp values and solved. The method allows handling assignment problems with imprecise, qualitative cost data using fuzzy logic concepts.
UT Austin - Portugal Lectures on Portfolio Choiceguasoni
This document outlines key concepts related to long-term investment opportunities and frictions. It discusses how investment opportunities depend on state variables that influence returns and risks over time. It also introduces the concepts of equivalent safe rate and equivalent annuity, which define the optimal growth rate of wealth or utility for a long-term investor. The document proposes solving for long-term optimal portfolios using duality bounds, stationary equations, and criteria for long-run optimality.
This document provides definitions and formulas from theoretical computer science, including:
1. Big O, Omega, and Theta notation for analyzing algorithm complexity.
2. Common series like geometric and harmonic series.
3. Recurrence relations and methods for solving them like the master theorem.
4. Combinatorics topics like permutations, combinations, and binomial coefficients.
This document provides an overview of a macroeconomic model with four sectors: the product market, money market, bond market, and labor market. Key aspects of the model are presented, including the IS curve showing equilibrium in product and money markets, aggregate supply relationships, the Phillips curve, and dynamics of asset accumulation influenced by expectations. The document also provides examples and exercises to illustrate application of the macroeconomic model.
D-Branes and The Disformal Dark Sector - Danielle Wills and Tomi KoivistoCosmoAIMS Bassett
The document discusses disformal relations between the physical and gravitational geometry. It begins by introducing the most general form such a relation could take, with two arbitrary functions C and D of a scalar field and its derivative.
It then discusses how this type of relation naturally arises in many modified gravity and scalar-tensor theories. Specific examples mentioned include f(R) gravity and the Dirac-Born-Infeld (DBI) string scenario.
The document outlines how a disformal coupling could have interesting phenomenological implications and be detectable through effects on cosmology and structure formation. It concludes by stating the disformal relation is an important generalization worth further study.
The document describes a Hamiltonian with terms including Ji,j|ωiωj| and Ei|ωiωi| that depends on parameters ∆/J and ω. It studies the behavior of the system as ∆/J increases from 0 to greater than 6, including plots of the momentum distribution |P(k)|2 that show it spreading out over more values of k/k1. The dependence of the system on other parameters like α, s1, and s2 is also examined through additional plots.
Limited participation and local currency sovereign debtADEMU_Project
This document summarizes a paper that builds economic models to explain the large increase in foreign holdings of local currency emerging market sovereign debt. The paper develops models with limited market participation and different investor types to show how foreign investor entry into local currency bond markets can increase when risk aversion is low. Simulation of the models using interest rate data suggests foreign holdings of local currency debt rose strongly after the Great Recession when developed country rates fell. The paper aims to understand the implications of changing currency composition and investor composition of emerging market government debt.
This document describes pricing options using lattice models, specifically binomial trees. It provides details on:
1) Using a binomial tree to price a European call option by replicating the option payoff at each node.
2) Matching the moments of the binomial and Black-Scholes models to derive the Cox-Ross-Rubinstein (CRR) binomial tree.
3) Implementing the CRR model in C++ to price European call and put options via backward induction on the tree.
IJCER (www.ijceronline.com) International Journal of computational Engineerin...ijceronline
This document presents a method for solving fuzzy assignment problems where costs are represented by linguistic variables and fuzzy numbers. Linguistic variables are used to convert qualitative cost data into quantitative fuzzy numbers. Yager's ranking method is applied to rank the fuzzy numbers, transforming the fuzzy assignment problem into a crisp one. The resulting crisp problem is then solved using the Hungarian method to find the optimal assignment that minimizes total cost. A numerical example demonstrates the approach, showing a fuzzy cost matrix converted to crisp values and solved. The method allows handling assignment problems with imprecise, qualitative cost data using fuzzy logic concepts.
UT Austin - Portugal Lectures on Portfolio Choiceguasoni
This document outlines key concepts related to long-term investment opportunities and frictions. It discusses how investment opportunities depend on state variables that influence returns and risks over time. It also introduces the concepts of equivalent safe rate and equivalent annuity, which define the optimal growth rate of wealth or utility for a long-term investor. The document proposes solving for long-term optimal portfolios using duality bounds, stationary equations, and criteria for long-run optimality.
This document provides definitions and formulas from theoretical computer science, including:
1. Big O, Omega, and Theta notation for analyzing algorithm complexity.
2. Common series like geometric and harmonic series.
3. Recurrence relations and methods for solving them like the master theorem.
4. Combinatorics topics like permutations, combinations, and binomial coefficients.
This document provides an overview of a macroeconomic model with four sectors: the product market, money market, bond market, and labor market. Key aspects of the model are presented, including the IS curve showing equilibrium in product and money markets, aggregate supply relationships, the Phillips curve, and dynamics of asset accumulation influenced by expectations. The document also provides examples and exercises to illustrate application of the macroeconomic model.
Let's Practice What We Preach: Likelihood Methods for Monte Carlo DataChristian Robert
This document discusses methods for Monte Carlo data, including importance sampling and bridge sampling. It notes that for importance sampling, maximizing the likelihood does not result in an estimator for the estimand of interest, as the likelihood is independent of the estimand. Bridge sampling provides an estimating equation approach where the data from both sampling distributions are relevant to inferring the ratio of normalizing constants.
This presentation provides and overview of the paper "Jump-Diffusion Risk-Sensitive Asset Management." The paper proposes a solution to a portfolio optimization problem in which asset prices are represented by SDEs driven by Brownian motion and a Poisson random measure,
with drifts that are functions of an auxiliary diffusion ‘factor’ process.
This document provides an overview of mean variance optimization and efficient frontier analysis in financial portfolio selection. It introduces key concepts such as quantifying random asset returns using mean and variance, constructing optimal portfolios that maximize return for a given level of risk, and graphing the efficient frontier. The document also covers the two-fund theorem and how introducing a risk-free asset shifts the analysis to focus on excess returns above the risk-free rate.
The document outlines a model for analyzing transaction costs in portfolio choice. It presents explicit formulas for trading boundaries, certainty equivalent rates, liquidity premiums, and trading volumes in terms of model parameters like the spread. Graphs show how these quantities vary with factors like risk aversion. The results are obtained by solving a free boundary problem using a shadow price approach and smooth pasting conditions at the boundaries. Asymptotics of the solutions are also derived in terms of the spread approaching zero.
Hedging, Arbitrage, and Optimality with Superlinear Frictionsguasoni
In a continuous-time model with multiple assets described by cadlag processes, this paper characterizes superhedging prices, absence of arbitrage, and utility maximizing strategies, under general frictions that make execution prices arbitrarily unfavorable for high trading intensity. With such frictions, dual elements correspond to a pair of a shadow execution price combined with an equivalent martingale measure. For utility functions defined on the real line, optimal strategies exist even if arbitrage is present, because it is not scalable at will.
The document discusses a joint work between Georg Gottlob from the Computing Laboratory at the University of Oxford's Department of Computer Science and G. Orsi and A. Pieris. It presents formal logic rules and models, including intensional databases, Datalog rules, and least Herbrand models. It also contains questions regarding these logical expressions.
Strategic selection of the most feasible projects usingAlexander Decker
This document describes using a linear programming model to strategically select the most feasible combination of projects for an organization. It provides an example of an organization selecting among 20 potential projects based on constraints like cost, labor hours, quality, and technology usage. The linear programming model is formulated with the objective of maximizing the total value of the selected projects. The model is implemented in LINGO software and the optimal solution selects projects A, G, H, J, L, M, and R.
This document summarizes a model of high frequency trading in a limit order book. It describes the assumptions of the model, which includes market orders arriving as Poisson processes and the agent's objective to maximize expected utility of terminal wealth. The model defines the optimal bid and ask prices as indifference prices adjusted by the arrival rates and risk aversion. Simulation results show higher profits for an inventory strategy compared to a symmetric strategy when the investor is not very risk averse. Future work could generalize the model and consider other utility functions.
The document discusses a model of dynamic trading volume under price impact. It begins with motivations and an outline of the model, which considers a representative agent facing constant investment opportunities and risk aversion, trading in a market with finite depth. Key results discussed include the optimal trading policy, welfare implications, and dynamics of the implied trading volume. Asymptotic expansions show turnover is proportional to displacement from the target risky weight and depends on parameters like volatility, risk aversion, and market depth. Trading volume is characterized as having properties similar to an Ornstein-Uhlenbeck process. The model provides a way to estimate market depth from observed trading volumes.
The self-dual codes form one of the important classes of linear codes because of their rich algebraic structure and their close connections with other combinatorial configurations like block designs, lattices, graphs, etc.
This document presents a critique of the Black-Scholes option pricing model. It identifies two primary errors in the Black-Scholes approach: 1) They presented an incorrect interpretation of the option price by defining it based on risk-free borrowing rather than as a settlement price between buyer and seller. 2) Their implementation of the original Black-Scholes idea led to an incorrect pricing equation, while a more accurate derivation should have led to a different pricing equation. The document then presents an alternative option pricing approach based on an investment equality principle that two cash flows are equal when their instantaneous rates of return are equal at any time. This provides a definition of option price at time t that promises the same rate of return
This document provides an overview of binary repetition codes and the Hamming distance as a simple error-correcting code. It discusses how coding theory studies error correction, cryptography and data compression applications of codes. Binary repetition codes represent messages as repeated bits and use majority voting to decode received bits and correct errors introduced over noisy channels. The document demonstrates generating codewords from messages, encoding messages, calculating the Hamming distance between codewords, and simulating encoding and transmission over a channel with Sage.
This document discusses real option valuation techniques for technology projects. It begins by providing examples of real options like options to abandon or expand a project. It then covers various valuation models like decision trees, binomial models, and Monte Carlo simulations. These models can value flexibility and account for uncertainty. The document concludes by discussing Captum Capital which provides valuation and consulting services, including upcoming events on their valuation masterclass and workshop on technology evaluation.
Ardo Hansson. Euroala majanduses toimuvast ja selle mõjust EestileEesti Pank
Eesti Panga president Ardo Hansson esines ettekandega euroala majanduse olukorrast ning selle mõjust Eestile Tartu õpetajate sügisfoorumil Vanemuise kontserdimajas. 27.08.2013
Mārtiņš Bitāns. Lessons from the Latvian austerity programEesti Pank
The document examines Latvia's fiscal austerity program following the 2008 financial crisis which saw large cuts to government spending and wages that helped reduce high budget deficits and current account imbalances. Through internal devaluation, fiscal austerity restored Latvia's competitiveness and export-led growth, avoiding a deep and prolonged recession despite an initial sharp GDP decline. The success of Latvia's fiscal austerity program demonstrates that expansionary fiscal contraction can work under certain economic conditions.
Harri Turunen. Government spending in a volatile economy at the zero lower boundEesti Pank
1) Government spending multipliers are generally small when the economy is not at the zero lower bound (ZLB), and are increased only slightly by higher uncertainty. 2) When the economy is at the ZLB due to large negative shocks to bond returns or discount rates, multipliers can be substantially above one and increase further with higher spending or productivity volatility. 3) Different types of shocks can drive the economy to the ZLB, but bond return and monetary policy shocks are the primary drivers, while productivity shocks yield relatively small multipliers.
Agenda for Europe: which of Estonia’s success factors can be useful for other...Eesti Pank
Ardo Hansson, Eesti Pank 5 April 2014
A financial forum organised by The European House – Ambrosetti in Italy http://www.ambrosetti.eu/en/news/2014/financial-markets-workshop
Giovanni Calice. Spillovers in Sovereign Bond and CDS Markets: An Analysis of...Eesti Pank
This paper analyzes liquidity spillovers in sovereign bond and credit default swap (CDS) markets during the Eurozone sovereign debt crisis from 2007 to 2011. It develops a time-varying vector autoregression model to establish the dynamic interaction between sovereign bond and CDS credit spreads and liquidity spreads. The authors collect transaction data from Thomson Reuters and Datastream to construct daily indices for sovereign bond yields and CDS spreads of 10 Eurozone countries.
Sarah Brown. Portfolio Allocation, Background Risk and Households’ Flight to ...Eesti Pank
This document describes a fractional ordered probit (DFOP) model to analyze how background risks affect households' allocation of financial assets into risky and safe asset classes. The model accounts for the fact that background risks like labor income volatility should cause households to "deflate" or reduce their holdings of risky assets. It models the expected share of a household's portfolio allocated to high, medium, and low risk asset classes based on observed characteristics and two background risk equations representing the propensity to move away from high and medium risk assets. The model is estimated on US Survey of Consumer Finances data from 1998-2013 to investigate how different types of uncertainty influence household portfolio composition.
Let's Practice What We Preach: Likelihood Methods for Monte Carlo DataChristian Robert
This document discusses methods for Monte Carlo data, including importance sampling and bridge sampling. It notes that for importance sampling, maximizing the likelihood does not result in an estimator for the estimand of interest, as the likelihood is independent of the estimand. Bridge sampling provides an estimating equation approach where the data from both sampling distributions are relevant to inferring the ratio of normalizing constants.
This presentation provides and overview of the paper "Jump-Diffusion Risk-Sensitive Asset Management." The paper proposes a solution to a portfolio optimization problem in which asset prices are represented by SDEs driven by Brownian motion and a Poisson random measure,
with drifts that are functions of an auxiliary diffusion ‘factor’ process.
This document provides an overview of mean variance optimization and efficient frontier analysis in financial portfolio selection. It introduces key concepts such as quantifying random asset returns using mean and variance, constructing optimal portfolios that maximize return for a given level of risk, and graphing the efficient frontier. The document also covers the two-fund theorem and how introducing a risk-free asset shifts the analysis to focus on excess returns above the risk-free rate.
The document outlines a model for analyzing transaction costs in portfolio choice. It presents explicit formulas for trading boundaries, certainty equivalent rates, liquidity premiums, and trading volumes in terms of model parameters like the spread. Graphs show how these quantities vary with factors like risk aversion. The results are obtained by solving a free boundary problem using a shadow price approach and smooth pasting conditions at the boundaries. Asymptotics of the solutions are also derived in terms of the spread approaching zero.
Hedging, Arbitrage, and Optimality with Superlinear Frictionsguasoni
In a continuous-time model with multiple assets described by cadlag processes, this paper characterizes superhedging prices, absence of arbitrage, and utility maximizing strategies, under general frictions that make execution prices arbitrarily unfavorable for high trading intensity. With such frictions, dual elements correspond to a pair of a shadow execution price combined with an equivalent martingale measure. For utility functions defined on the real line, optimal strategies exist even if arbitrage is present, because it is not scalable at will.
The document discusses a joint work between Georg Gottlob from the Computing Laboratory at the University of Oxford's Department of Computer Science and G. Orsi and A. Pieris. It presents formal logic rules and models, including intensional databases, Datalog rules, and least Herbrand models. It also contains questions regarding these logical expressions.
Strategic selection of the most feasible projects usingAlexander Decker
This document describes using a linear programming model to strategically select the most feasible combination of projects for an organization. It provides an example of an organization selecting among 20 potential projects based on constraints like cost, labor hours, quality, and technology usage. The linear programming model is formulated with the objective of maximizing the total value of the selected projects. The model is implemented in LINGO software and the optimal solution selects projects A, G, H, J, L, M, and R.
This document summarizes a model of high frequency trading in a limit order book. It describes the assumptions of the model, which includes market orders arriving as Poisson processes and the agent's objective to maximize expected utility of terminal wealth. The model defines the optimal bid and ask prices as indifference prices adjusted by the arrival rates and risk aversion. Simulation results show higher profits for an inventory strategy compared to a symmetric strategy when the investor is not very risk averse. Future work could generalize the model and consider other utility functions.
The document discusses a model of dynamic trading volume under price impact. It begins with motivations and an outline of the model, which considers a representative agent facing constant investment opportunities and risk aversion, trading in a market with finite depth. Key results discussed include the optimal trading policy, welfare implications, and dynamics of the implied trading volume. Asymptotic expansions show turnover is proportional to displacement from the target risky weight and depends on parameters like volatility, risk aversion, and market depth. Trading volume is characterized as having properties similar to an Ornstein-Uhlenbeck process. The model provides a way to estimate market depth from observed trading volumes.
The self-dual codes form one of the important classes of linear codes because of their rich algebraic structure and their close connections with other combinatorial configurations like block designs, lattices, graphs, etc.
This document presents a critique of the Black-Scholes option pricing model. It identifies two primary errors in the Black-Scholes approach: 1) They presented an incorrect interpretation of the option price by defining it based on risk-free borrowing rather than as a settlement price between buyer and seller. 2) Their implementation of the original Black-Scholes idea led to an incorrect pricing equation, while a more accurate derivation should have led to a different pricing equation. The document then presents an alternative option pricing approach based on an investment equality principle that two cash flows are equal when their instantaneous rates of return are equal at any time. This provides a definition of option price at time t that promises the same rate of return
This document provides an overview of binary repetition codes and the Hamming distance as a simple error-correcting code. It discusses how coding theory studies error correction, cryptography and data compression applications of codes. Binary repetition codes represent messages as repeated bits and use majority voting to decode received bits and correct errors introduced over noisy channels. The document demonstrates generating codewords from messages, encoding messages, calculating the Hamming distance between codewords, and simulating encoding and transmission over a channel with Sage.
This document discusses real option valuation techniques for technology projects. It begins by providing examples of real options like options to abandon or expand a project. It then covers various valuation models like decision trees, binomial models, and Monte Carlo simulations. These models can value flexibility and account for uncertainty. The document concludes by discussing Captum Capital which provides valuation and consulting services, including upcoming events on their valuation masterclass and workshop on technology evaluation.
Ardo Hansson. Euroala majanduses toimuvast ja selle mõjust EestileEesti Pank
Eesti Panga president Ardo Hansson esines ettekandega euroala majanduse olukorrast ning selle mõjust Eestile Tartu õpetajate sügisfoorumil Vanemuise kontserdimajas. 27.08.2013
Mārtiņš Bitāns. Lessons from the Latvian austerity programEesti Pank
The document examines Latvia's fiscal austerity program following the 2008 financial crisis which saw large cuts to government spending and wages that helped reduce high budget deficits and current account imbalances. Through internal devaluation, fiscal austerity restored Latvia's competitiveness and export-led growth, avoiding a deep and prolonged recession despite an initial sharp GDP decline. The success of Latvia's fiscal austerity program demonstrates that expansionary fiscal contraction can work under certain economic conditions.
Harri Turunen. Government spending in a volatile economy at the zero lower boundEesti Pank
1) Government spending multipliers are generally small when the economy is not at the zero lower bound (ZLB), and are increased only slightly by higher uncertainty. 2) When the economy is at the ZLB due to large negative shocks to bond returns or discount rates, multipliers can be substantially above one and increase further with higher spending or productivity volatility. 3) Different types of shocks can drive the economy to the ZLB, but bond return and monetary policy shocks are the primary drivers, while productivity shocks yield relatively small multipliers.
Agenda for Europe: which of Estonia’s success factors can be useful for other...Eesti Pank
Ardo Hansson, Eesti Pank 5 April 2014
A financial forum organised by The European House – Ambrosetti in Italy http://www.ambrosetti.eu/en/news/2014/financial-markets-workshop
Giovanni Calice. Spillovers in Sovereign Bond and CDS Markets: An Analysis of...Eesti Pank
This paper analyzes liquidity spillovers in sovereign bond and credit default swap (CDS) markets during the Eurozone sovereign debt crisis from 2007 to 2011. It develops a time-varying vector autoregression model to establish the dynamic interaction between sovereign bond and CDS credit spreads and liquidity spreads. The authors collect transaction data from Thomson Reuters and Datastream to construct daily indices for sovereign bond yields and CDS spreads of 10 Eurozone countries.
Sarah Brown. Portfolio Allocation, Background Risk and Households’ Flight to ...Eesti Pank
This document describes a fractional ordered probit (DFOP) model to analyze how background risks affect households' allocation of financial assets into risky and safe asset classes. The model accounts for the fact that background risks like labor income volatility should cause households to "deflate" or reduce their holdings of risky assets. It models the expected share of a household's portfolio allocated to high, medium, and low risk asset classes based on observed characteristics and two background risk equations representing the propensity to move away from high and medium risk assets. The model is estimated on US Survey of Consumer Finances data from 1998-2013 to investigate how different types of uncertainty influence household portfolio composition.
9. oktoobril toimus Eesti Panga muuseumi pressiruumis infotund, kus keskpanga ökonomistid Natalja Viilmann ja Orsolya Soosaar andsid ülevaate Eesti tööturu arengust.
Konstantīns Beņkovskis, Julia Wörz. Evaluation of Non-Price Competitiveness o...Eesti Pank
The document evaluates the price and non-price competitiveness of exports from Central, Eastern and South-Eastern European countries to the EU market. It outlines limitations of traditional real effective exchange rate indicators and proposes a theoretical framework to assess changes in relative export prices adjusted for quality or taste using elasticities of substitution. Estimates of elasticities are obtained through a system of demand and supply equations estimated with GMM. The results suggest median elasticities of substitution between 4.9-6.2 for large EU countries.
Keskpanga ökonomist Natalja Viilmann tutvustab Eesti majanduse konkurentsivõime ülevaadet.
Ülevaates analüüsitakse Eesti ekspordivõimet, suhtelise tootlikkuse kasvu ja vaadeldakse rahvusvahelistel turgudel hakkamasaamist iseloomustavaid näitajaid, mis põhinevad siinsete hindade ja palkade dünaamika võrdlusel Eesti peamiste kaubanduspartneritega. Analüüs Eesti majanduse konkurentsivõime kohta valmib kord aastas.
Rainer Olt. Ühtne euromaksete piirkond SEPAEesti Pank
Eesti Panga makse- ja arveldussüsteemide osakonna juhtivspetsialist Rainer Olt esines ettekandega Eesti maksekeskkonnast Eesti Kaupmeeste Liidu korraldatud maksekeskkonna muudatusi käsitleval seminaril 23.04.2013
Golden Growth: Restoring the Lustre of the European Economic ModelEesti Pank
Europe has experienced strong economic growth and convergence since the 1970s. It has become a highly integrated trade and finance region, with emerging European countries experiencing particularly large capital inflows that have boosted growth. However, productivity growth has slowed in larger European economies relative to the US in recent decades. The US specializes in newer, more research-intensive sectors while Europe focuses more on older industries. Addressing barriers to business and further improving integration could help restore faster productivity growth across Europe.
Eesti Panga president Madis Müller ja finantsstabiilsuse osakonna juhataja Jaak Tõrs tutvustasid kõigile majandushuvilistele äsja valminud Eesti finantssektori ülevaadet.
Karsten Staehr. Macroeconomic News and Sovereign Interest Rate Spreads before...Eesti Pank
1. The document analyzes how the effect of macroeconomic news on Italian sovereign interest rate spreads changed before and during the ECB's quantitative easing program from 2014-2022.
2. It finds that macroeconomic news had a significant effect on spreads before QE, with a coefficient of around -4, whereas the effect during QE was near zero, with the difference being statistically significant.
3. The results were robust to different specifications and definitions of news shocks. This suggests that QE helped insulate sovereign bond spreads from the impact of macroeconomic news by removing tail risks and "killing normal market reactions to news."
Majanduse Rahastamise Ülevaade. Veebruar 2023Eesti Pank
22.02.2023 Eesti Panga ökonomistid Taavi Raudsaar ja Mari Tamm tutvustasid äsja valminud Majanduse Rahastamise Ülevaadet ehk millised on Eesti majapidamiste ja ettevõtete rahastamisvõimalused.
The Sufficiency of Debt Relief as a Panacea to Sovereign Debt Crisis in Sub-S...Eesti Pank
The thesis analyzes the efficacy of debt relief as a solution to sovereign debt crises in Sub-Saharan Africa, using Ghana, Nigeria, and Zambia as case studies. It conducts debt sustainability analyses under various scenarios of partial or full debt reduction, cancellation, and standstills. Structural impulse response analyses show how macroeconomic factors like growth, interest rates, and exchange rates impact debt levels over time. The results suggest that debt relief can reduce debt burdens but economic reforms are also needed for long-term sustainability. Limitations include low frequency data and lower assumed interest rates.
Luck and skill in the performance of global equity funds in Central and Easte...Eesti Pank
The document summarizes a study examining the performance of actively managed global equity funds in Central and Eastern Europe between 2005-2019. The study uses a bootstrap methodology to separate fund manager skill from luck. Key findings include:
- Approximately 5% of funds showed skill in outperforming their benchmarks gross of fees, with one fund in particular outperforming factor returns net and gross of fees.
- Most funds that underperformed did so due to lack of skill rather than bad luck.
- Fees were too high relative to the abnormal performance added by many mutual funds.
- While some fund managers possessed skill, it was generally not enough to cover their fees, suggesting fees may be too high or competition
The document summarizes a study examining how Lithuanian food manufacturing firms adjusted to trade sanctions imposed by Russia in 2014 that banned many agricultural imports from the EU.
The main adjustments included:
- Reducing part-time employment as the most flexible margin of adjustment. Larger reductions occurred for firms more exposed to the Russian market.
- Increasing exports to other countries to compensate for lost Russian exports. More exposed firms increased other exports more.
- Decreasing investment and full-time employment for more exposed firms, though full-time employment adjustments took longer.
A conceptual framework is presented predicting this sequence of adjustments, with part-time labor adjusting first due to lower costs, followed by exports, investment,
The document provides an economic forecast for Estonia from 2022-2025. It finds that high inflation and energy prices are hurting the global and European economies. Inflation in Estonia is projected to remain high in 2023 before slowly falling in 2024-2025. Interest rates are also expected to continue rising to curb inflation. Fiscal policy measures risk exacerbating inflation. Overall the Estonian economy is forecast to recover by late 2023 but high costs and uncertainty will continue weighing on growth.
Fabio Canovaand Evi Pappa. Costly disasters, energy consumption, and the role...Eesti Pank
Neljapäeval, 20. oktoobril 2022 toimus Eesti Panga avatud seminar, kus rahvusvaheliselt tunnustatud majandusteadlane Fabio Canova tutvustas koos Evi Pappaga valminud uurimustööd „Kulukad looduskatastroofid, energiatarbimine ning eelarvepoliitika“ (Costly disasters, energy consumption, and the role of fiscal policy).
Romain Duval. IMF Regional Economic Outlook for EuropeEesti Pank
31. oktoobril 2022 toimus Eesti Panga avatud seminar, kus Rahvusvahelise Valuutafondi esindaja Romain A. Duval tutvustas IMFi Euroopa osakonnas vastvalminud regionaalset majandusväljavaadet.
Pressikonverents Eesti Pangas, kus keskpanga president Madis Müller ja finantsstabiilsuse osakonna juhataja Jaak Tõrs tutvustavad ülevaadet, mis analüüsib suuremaid riske Eesti finantssektoris.
Pressikonverentsil saab teada:
kuidas majanduse jahenemine, kiire hinnakasv ja intresside tõus mõjutavad inimeste ja ettevõtete võimet laene tagasi maksta
milline mõju saab majanduse jahenemisel olema uute laenude andmisel ettevõtetele ja inimestele
kuidas mõjutavad võlakirjaturgudel toimuvad muutused Eesti pangandussektori rahastamist
milliseid samme tuleb keskpanga hinnangul astuda finantssektori tugevuse kindlustamiseks.
University of North Carolina at Charlotte degree offer diploma Transcripttscdzuip
办理美国UNCC毕业证书制作北卡大学夏洛特分校假文凭定制Q微168899991做UNCC留信网教留服认证海牙认证改UNCC成绩单GPA做UNCC假学位证假文凭高仿毕业证GRE代考如何申请北卡罗莱纳大学夏洛特分校University of North Carolina at Charlotte degree offer diploma Transcript
In a tight labour market, job-seekers gain bargaining power and leverage it into greater job quality—at least, that’s the conventional wisdom.
Michael, LMIC Economist, presented findings that reveal a weakened relationship between labour market tightness and job quality indicators following the pandemic. Labour market tightness coincided with growth in real wages for only a portion of workers: those in low-wage jobs requiring little education. Several factors—including labour market composition, worker and employer behaviour, and labour market practices—have contributed to the absence of worker benefits. These will be investigated further in future work.
Enhancing Asset Quality: Strategies for Financial Institutionsshruti1menon2
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David Seim. Tax Rates, Tax Evasion and Cognitive Skills
1. Tax Rates, Tax Evasion and Cognitive Skills
David Seim
IIES, Stockholm University
October 2012
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
2. Introduction
Earnings responses to taxes:
(i) Real substitution responses
(ii) Reporting responses (legal and illegal)
Tax system complex: ability to respond possibly affected by cognitive
ability
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
3. This Paper
Identify the effects of a tax change on substitution and evasion.
Study whether the cognitively able are more likely to evade.
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
4. Motivation
Crucial to understand tax evasion for giving policy recommendations
on how to reduce evasion.
Need to know tax elasticity of both taxable net wealth and actual net
wealth to determine optimal tax rate.
If the ability to evade taxes differs across people:
The tax incidence will fall disproportionally on the less able.
Heterogenous effects on wealth inequality within skill groups.
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
5. Contribution
Provide an empirical measure of tax evasion.
Find tax elasticities of evasion on the order of 1 - 3.5 in both a
structural and reduced form framework.
Use military enlistment data on cognitive skills to establish that
cognitively able are more likely to evade the wealth tax.
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
6. Roadmap
I STRUCTURAL APPROACH
Develop a model of savings and evasion.
Estimate model using bunching at kink points.
Administrative data on taxable net wealth for the Swedish population.
II REDUCED FORM APPROACH
Use new measure of tax evasion.
Apply a D-in-D framework exploiting tax reforms.
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
7. III BOUNDED RATIONALITY AND TAX RESPONSES
Construct model of cognitive skills, savings and evasion building on
Chetty et al. (2007).
Use Swedish military enlistment data on cognitive skills to test the
model’s predictions.
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
8. Related Literature
Optimal taxation: Feldstein (1999), Saez (2001), Chetty (2009).
Tax evasion: Allingham and Sandmo (1972), Clotfelter (1983),
Slemrod (1985), Slemrod (2001).
Methodology: Saez (2010), Chetty et al. (2011).
Cognitive costs: Chetty et al (2007), Liebman and Luttmer (2011).
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
9. STRUCTURAL APPROACH
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
10. Model
Individuals have homothetic utility function
1−δ 1−δ
c1,i c2,i
ui (c1 , c2 ) = +β
1−δ 1−δ
where c1,i is consumption today, c2,i is consumption tomorrow, β is
the discount factor, 1 is the IES.
δ
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
11. Agents’ budget constraints
c1,i = yi − s
c2,i = (1 + r ) ((1 − τ ) (s − e) + e − C (e, s))
where yi is income, distributed with continuous and differentiable
CDF F (y ), s is savings, r is the deterministic interest rate, τ is tax
on taxable savings.
Agents can evade taxes τ by choosing e < s subject to a cost
function C (e, s).
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
12. Cost Function
Builds on Slemrod (2001).
e γ 1
C (e, s) = pe
s 1+γ
where p > τ and γ measures curvature of cost.
1
τ γ
ei∗ = si∗
p
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
13. Mean Evasion as Function of Net Wealth
Evasion = max{Third Party Reported Net Wealth − Taxable Net Wealth, 0}
400000
300000
Evasion
200000
100000
0
1500000 2500000 3500000 4500000
Third Party Reported Net Wealth
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
14. Model
In equilibrium,
1−δ
1 δ
1 1−δ
τ γ γ
β (1 + r )
δ δ 1−τ 1− p 1+γ
si∗ = 1−δ yi
1 δ
1 1−δ
τ γ γ
1 + β (1 + r )
δ δ 1−τ 1− p 1+γ
and taxable net wealth becomes
1−δ
1 δ
1 1−δ γ
τ γ
β (1 + r )
δ δ 1−τ 1− p 1+γ
1
τ γ
si∗ − ei∗ = 1−δ
1− yi
1 1−δ
1 δ p
τ γ γ
1 + β (1 + r )
δ δ 1−τ 1− p 1+γ
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
15. Linear Tax Scheme, τ = τ0
After Tax Net Wealth, c2 = (s − e) − T (s − e)
IC High
IC Low
Slope 1 − τ0
s −e
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
16. Progressive Tax Scheme with τ = τ1 > τ0 for s − e >= z ∗
After Tax Net Wealth, c2 = (s − e) − T (s − e)
IC High 1
IC Low
IC High 2
Slope 1 − τ1
Slope 1 − τ0
s −e
z∗ z ∗ + ∆z
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
17. Simulated Savings Using Swedish Data on Income, τ = 0
6000
5000
4000
Frequency
3000
2000
1000
0
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5
s−e 5
x 10
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
18. Simulated Savings Using Swedish Data on Income,
τ = 0.015 above SEK 150000
6000
5000
4000
Frequency
3000
2000
1000
0
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5
s−e 5
x 10
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
19. Agents with
y ∈ f (τ0 ) , f (τ1 )
bunch at the kink point. (Where f (τ ) is given here .)
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
20. Number of agents bunching:
z ∗ +∆z
B= h0 (s) ds
z∗
h0 (z ∗ ) + h0 (z ∗ + ∆z)
≈ ∆z
2
˜
≈ ∆z h0
or, equivalently,
1−δ
1 δ
1 1−δ τ1 γ γ
1 + β R δ δ 1 − τ1 1− p 1+γ
B
≈ z∗ ×
˜
h0 1
1−δ
δ
1 + β δ R 1−δ
1
δ 1 − τ0 1−
τ0 γ γ
p 1+γ
1−δ
1 δ 1
τ0 γ γ τ0 γ
1 − τ0 1− p 1+γ
1− p
1−δ
1 δ 1
τ1 γ γ τ1 γ
1 − τ1 1− p 1+γ
1− p
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
21. Solve for structural parameter γ as a function of:
(i) known parameters: z ∗ , τ0 , τ1 ,
B
(ii) the excess bunching around the kink point: ˜
h0
,
(iii) intertemporal parameter δ, discount factor β.
(iv) cost p.
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
22. Institutional Background and Data
Figure: MTR since 1992
Marginal Tax Rate %
1.5
Taxable Net Wealth
z∗
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
23. Movement in Tax Bracket Cutoff Across Years
SEK 1000
3500
Couples filing jointly
3000
2500
2000
1500
Singles
1000
1998 1999 2000 2001 2002 2003 2004 2005 2006
Year
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
24. Declaring Wealth
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
25. Table: Perceptions of Tax Cheating in Sweden, in %
Very Quite Not very Not at all Don’t
common common common common know
Federal inc. tax 8.6 26.6 32.5 8.8 22.1
Corporate tax 10.4 29.0 20.6 3.5 34.8
Inheritance tax 11.2 30.3 24.5 6.2 26.2
Wealth tax 18.7 37.2 15.6 3.8 23.5
Estate tax 4.7 17.3 35.2 16.6 24.8
Gas tax 2.7 9.6 31.4 25.0 29.8
Source: Survey by Hammar et al. 2006.
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
26. Distribution of Third Party Reported Net Wealth,
2002-2006
5000
4000
Frequency
3000
2000
1250000 1375000 1500000 1625000 1750000
Third Party Reported Net Wealth, SEK (2002−2006)
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
27. Distribution of Taxable Net Wealth, 2002-2006
5000
4000
Frequency
3000
2000
1250000 1375000 1500000 1625000 1750000
Taxable Net Wealth, SEK (2002−2006)
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
28. Estimating Excess Bunching
I Follow previous literature
Estimate the counterfactual as a polynomial excluding points around
the kink.
II Nonparametric way
Compute the number of people tax liable using third party reported net
wealth but not using taxable net wealth.
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
29. Method I
ˆ
BN
Cj 1 + I [j > 0] ∞ =µ0 + µ1 Zj + µ2 Zj2 + . . . + µ7 Zj7 +
j=1
0
ρi I [Zj = i] + ε0
j
i=−R
where Cj is number of people in net wealth bin j, Zj is taxable net wealth
relative to kink point in 5000 kronor intervals, R measures the lower bound
of the bunching that is allowed (measured in 5000 kronor).
B
Estimator of b = h0 given by:
0 ˆ
ˆ
BN j=−R Cj − Cj0
=
hˆ 0 ˆ
Cj
0
j=−R R+1
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
30. Empirical Results; Bunching
14000
12000
Frequency
10000
b=0.536 (0.0923)
8000
6000
−50 −40 −30 −20 −10 0 10 20 30 40 50
Taxable Net Wealth Relative to Tax Bracket Cutoff (SEK 5000)
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
31. Bunching results, 2002-2006
5000
4000
Frequency
b=0.6565 (0.0991)
3000
2000
−50 −40 −30 −20 −10 0 10 20 30 40 50
Taxable Net Wealth Relative to Tax Bracket Cutoff (SEK 5000)
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
32. Does Bunching Track the Tax?
Bunching in 2001:
1200
1000
Frequency
800
600
400
1000000 1250000 1500000
Taxable Net Wealth
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
33. Does Bunching Track the Tax?
Bunching in 2002:
1500
1000
Frequency
500
0
1000000 12500000 1500000
Taxable Net Wealth Relative to Tax Bracket Cutoff (SEK 5000)
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
34. Does Bunching Track the Tax?
Bunching in 2001:
1200
2006 kink
1000
2001 kink infl. adj. 2001 kink inv−
ested in stocks
Frequency
2001 kink invested in riskfree interest rate
800
600
2001 kink
400
1000000 1250000 1500000
Taxable Net Wealth
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
35. Does Bunching Track the Tax?
Bunching in 2006:
1400
1200
1000
Frequency
800 600
400
1000000 1250000 1500000
Taxable Net Wealth
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
36. Method II
Estimator of B is given by:
BN = N I [z ∗ − R < Zi < z ∗ & Si > z ∗ ].
ˆ
i
where Zi is taxable net wealth of i, Si is third-party reported net
wealth, R is lower bound of allowed bunching.
0
ˆ i=−R Pi
Estimator of h0 is given by: h0 = R+1
where Pi denotes the number of people in third party reported net
wealth bin i.
ˆ
B = 1.009 (0.0189)
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
37. Calibration and Results
Elasticity of intertemporal substitution= 0.25
p ∈ [0.02, 1]
β = 0.98, (1 + r ) = 1.04
ˆ
B
Bunching, h = 1.009
0
gives γ = [0.42, 0.93] and εe,τ = [2.37, 1.08]
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
38. REDUCED FORM
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
39. Define evasion as e = max{s − (s − e), 0}.
Methodology (Gruber and Saez, 2002):
Regress ∆ log evasion over X years on ∆ log net-of-tax rates (NTR).
Instrument for ∆ log NTR using the simulated change from holding net
wealth levels constant at base year levels.
First stage strong: Coefficient= 0.690 and t = 350.
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
40. Table: Elasticities Estimates from Variation in Tax Bracket Cutoff
Dependent var:
∆ log Evasion 2y 2y 3y 3y
∆ log NTR -1.966*** -2.247*** -3.917*** -4.587***
(0.665) (0.664) (0.749) (0.747)
Age Fixed Effects X X X X
Year Fixed Effects X X X X
Region Fixed Effects X X
Wage spline X X
Base Year Evasion spline X X X X
Observations 1919253 1919253 1508141 1508141
Standard errors clustered at household level.
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
41. BOUNDED RATIONALITY
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
42. Let agents internalize θi ∈ [0, 1] of the tax in optimization.
θHIQ > θLIQ .
Perceived constraints:
c1 = y − s
e γ pe
c2 = R (1 − θi τ ) (s − e) + e −
s 1+γ
Let first period consumption adjust
c1 = y − s − τ R (1 − θi ) (s − e) .
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
43. Predictions:
(i) The amount of bunching increases with θ, i.e. highly skilled agents
bunch more.
(ii) Conditional on bunching, the distribution of taxable net wealth does
not differ across cognitive skill-groups.
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
44. Military Enlistment Data
Enlistment mandatory for men at age 18.
Two days of physical, cognitive and noncognitive tests.
Cognitive test consists of:
Logical skills
Verbal skills
Spatial skills
Technical comprehension
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
45. Heterogenous Responses by Cognitive Skills
.05 .15
Fraction of Bunchers
0 .1
Fraction of Bunchers, by Cognitive Skills
1000000 1500000 2000000 2500000 3000000
Pre wealth
High Skilled Low Skilled
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
46. Heterogenous Responses by Cognitive Skills
.04
Fraction of Bunchers
.02 .01 .03
0 2 4 6 8 10
Cognitive Skills
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
47. Table: Dependent var: indicator for evading the tax through bunching,
logit-model
(1) (2) (3) (4)
Sample: All All 2002 − 2006 2002 − 2006
Cognitive Skills 0.015 0.063* 0.103*** 0.127***
(0.025) (0.034) (0.040) (0.044)
Cognitive Skills Sq. -0.064*** -0.051*
(0.023) (0.028)
Third Party Rep. NW. X X
Third P.R. NW. - spline X X
Year Fixed Effects X X X X
Age Fixed Effects X X X X
Region Fixed Effects X X X X
Family Fixed Effects X X X X
Education Fixed Effects X X
Observations 60800 60800 34265 34265
Standard errors clustered on the household level.
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
48. Distribution of Taxable Net Wealth Among Bunchers,
2002-2006
1500
1000
Frequency
500
0
500000 1000000 1500000
Taxable Net Wealth
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
49. Distribution of Taxable Net Wealth Among Bunchers, High
Skilled, 2002-2006
80
60
Frequency
40
20
0
500000 1000000 1500000
Taxable Net Wealth
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
50. Distribution of Taxable Net Wealth Among Bunchers, Low
Skilled, 2002-2006
20
15
Frequency
105
0
500000 1000000 1500000
Taxable Net Wealth
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
51. Are people with high cognitive ability better at locating at
the kink?
Define two skill groups (high and low cognitive skills):
Mann-Whitney U test of equal distributions gives P-value for equality
of distributions = 0.4064
Use discrete variable with nine cognitive skill groups:
Kruskal-Wallis test gives P-value for equality of distributions = 0.4668
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
52. Conclusion
Approach tax evasion from three angles.
Findings:
Bunching identifies structural tax elasticity of evasion of 1 − 2.5.
Reduced form estimates on the order of 2 − 4.5.
Cognitive skills matter for the extent of evasion.
Actual revenue from tax increase is 88 % of the mechanical revenue
(ignoring real and evasion responses).
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
53. Final Remarks
STRUCTURAL APPROACH
Functional form assumptions, relies on parameter values being correct.
REDUCED FORM
Identifying assumption: Changes in tax rates not correlated with base
year net wealth.
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012
54. Appendix
Agents with
1−δ
1 δ
1 1−δ τ0 γ
z ∗ 1 + β R δ δ 1 − τ0 1− p
γ
1+γ
y∈ 1−δ
,
1 δ 1
1 1−δ τ0 γ γ τ0 γ
β R δ δ 1 − τ0 1− p 1+γ
1− p
1−δ
1 δ
1 1−δ τ1 γ
z ∗ 1 + β R δ δ 1 − τ1 1− p
γ
1+γ
1−δ
1 δ 1
1 1−δ τ1 γ γ τ1 γ
βδR δ 1 − τ1 1− p 1+γ
1− p
Back
D. Seim (IIES, Stockholm University) Tax Rates, Tax Evasion and Cognitive Skills October 2012