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Research


Taxpayer Responses over the Cycle: Evidence from Irish Notches

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This paper investigates the response of taxpayers to changes to three tax notches in Ireland before and after the Great Recession. Pre-2009 there is clear evidence of bunching in the earnings distribution below the notch thresholds, just avoiding large tax liabilities. This evidence disappears from 2009 onwards: the treatment effects of introducing a notch before the recession are three times larger than those in later years. This suggests that the taxpayer response is smaller during a recession. As the characteristics of both the employer and employee are determinants of the ability to report tax-advantageous incomes, sector-specific unemployment generates time-varying taxpayer responsiveness. However, the changing composition of the labor force alone cannot fully explain the results: the determinants of reporting a tax-advantaged income for people who remained with the same firms also vary substantially over the cycle.


Political Fragmentation and Fiscal Policy

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This paper examines the link between political fragmentation and tax policy. A model of government is presented where an n-member coalition chooses revenue and expenditure policies. I derive the response of tax policy to a change in the number of coalition partners. The model predicts that an increase in the number of parties leads to (i) lower taxes; (ii) lower expenditure; and (iii) lower social security transfers. These results are counter to the conventional wisdom that countries with more fragmented governments have larger public sectors. I test the model on a large panel of developed countries, and all three of the model's predictions are supported. My results have coefficients significantly different from, and of opposing signs to, the conventional wisdom. I estimate that moving from a two- to three-party legislature lowers tax revenue by 6.7%, expenditure by 9.5%, and transfers by 5.4%. These results are robust to a host of potentially important variables such as the ideological composition of government, changes in the tax base, and electoral cycle effects.


Optimal Pigouvian Taxation when Externalities Affect Demand

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Purchasing a network good such as a cell phone generates the positive externality of making phones more useful for others. Should we subsidize cell phones? If pollution/fumes from cars make commuting by foot less desirable, people become more willing to pay road tax. How then should we tax car pollution? To address these questions, I extend and generalize the standard optimal commodity tax model to let the demand for an externality-generating good depend on society's total consumption of that good. The optimal tax rate depends on three factors: the demand elasticities of the good, the marginal social cost, and the response of consumption to the externality. These factors are additive and separable. I find that if a negative externality affects consumption enough, the optimal policy can be to subsidize it.


Crime and Unemployment in Ireland, 2003-2016

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This paper investigates the relationship between crime and unemployment in Ireland during the Celtic Tiger boom, Great Recession, and subsequent economic recovery. Using unique administrative police station-level crime data and exploiting large variation in unemployment rates, I first document that a 10% increase in unemployment is associated with a 5% increase in thefts and burglaries. Instrumental variables show that a 1,000-person decline in employment causes 15-25 more thefts or burglaries per quarter. The property crime-unemployment relationship remained robust during the most recent period of substantial economic recovery, with areas where the recovery was fastest also experiencing sharper decreases in property crime.

Coverage: Irish Times, Irish Times (again)

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