We show that, if giving is equivalent to not taking, impure altruism could account for List’s (in Journal of Political Economy 115(3):482–493, 2007) finding that the payoff to recipients in a dictator game decreases when the dictator has the option to take. We examine behavior in dictator games with different taking options but equivalent final payoff possibilities. We find that recipients tend to earn more as the amount the dictator must take to achieve a given final payoff increases, a result consistent with the hypothesis that the cold prickle of taking is stronger than the warm glow of giving. We conclude that not taking is not equivalent to giving and agree with List (in Journal of Political Economy 115(3):482–493, 2007) that the current social preference models fail to rationalize the observed data.

Over the past decade, the most salient changes in macroeconomic conditions in developed economies have included rising government debt and population aging, which are strongly correlated with each other. This paper investigates fiscal multipliers by disentangling the effects of population aging from those of government debt. Our analysis, which uses heterogeneous panel data from 24 OECD economies, shows that while fiscal policy is ineffective for economies with high-debt levels, it is effective for economies with low-debt levels. Furthermore, the estimation results reveal that fiscal policy is ineffective for aged economies, regardless of the level of government debt. However, for nonaged economies, while fiscal policy leads to negative effects on output in times of high debt, its positive effects are more pronounced in times of low debt. Our results suggest that, for the effective implementation of fiscal stimulus policies, policy-based stimulation of employment in the labor market is essential.

This JOIE symposium features some of the most influential papers presented in the seventh version of the conference on The shadow economy, tax behaviour, and institutions. Accordingly, it brings together contributions from several disciplines and schools of thought in the social sciences and the humanities exploring such issues as the role of formal and informal institutions in understanding the shadow economy, the importance of social aversion in the motivations for tax compliance, and the dual nature of corruption. This introduction lays out the scope of the symposium, summarises the preceding literature on the topic, and provides a brief outline of each contributing article, noting that, although each paper focuses on a different economic and cultural context, they share several elements in common with alternative theories addressing the institutional, psychological, and sociological aspects of tax law compliance and other appropriate behaviours.

This paper studies the macroeconomic effects of seven key TCJA provisions, including the tax cuts for individuals and businesses, the bonus depreciation of equipment, the amortization of R&D expenses, and the limits on interest deductibility. I use a dynamic general equilibrium model with interest deductibility and accelerated depreciation. I find that, initially, the tax reform had a small positive effect on output and investment. In the medium term, however, the effect on output will diminish, and the effect on investment will turn negative. The tax reform will depress investment in R&D. Government debt will surge.

This paper offers a quantitative assessment of the impacts of the COVID-19 pandemic-induced lockdown and government fiscal plan, containing ‘green’ elements on the economy and the environment of South Africa. The analysis uses a dynamic computable general equilibrium model operationalised using a social accounting matrix coupled with a greenhouse gas balance and emissions data. We find that while the economy is harshly impacted by the pandemic in the short term, the government fiscal package ameliorates and cushions the negative effects on poor households. Importantly, an adaptation of the fiscal package towards a ‘greener’ policy achieves the same economic outcome and reduces unemployment. Carbon dioxide emissions decrease in the short run due to economic slowdown. This improvement persists until 2030. These results can be used as decision support for policy makers on how to orient the post COVID-19 policies to be pro-poor and pro-environment, and thus, ‘build back better and fairer’.

We present a new methodology that uses professional forecasts to estimate the effects of fiscal policy. We use short-term forecasts to better identify exogenous shocks to government spending by controlling for anticipatory information already in the public domain. We use longer-term forecasts to net out expectations from the future path of other variables, which improves accuracy and efficiency by focusing on more precise measures of the impact of shocks. We show that this improves the statistical fit relative to both local projection methods and vector autoregression-based analyses that do not control for the entire future path of expectations.

With a linear public goods game played in six different variants, this article studies two channels that might moderate social dilemmas and increase cooperation without using pecuniary incentives: moral framing and shaming. We find that cooperation is increased when noncontributing to a public good is framed as morally debatable and socially harmful tax avoidance, while the mere description of a tax context has no effect. However, without social sanctions in place, cooperation quickly deteriorates due to social contagion. We find ‘shaming’ free-riders by disclosing their misdemeanor to act as a strong social sanction, irrespective of the context in which it is applied. Moralizing tax avoidance significantly reinforces shaming, compared with a simple tax context.

Between 1800 and 1820, Buenos Aires and the former colonial Viceroyalty of Rio de la Plata faced an unprecedented fiscal crisis caused by the revolutionary wars, eventually solved by levying forced loans. This paper considers the unintended institutional consequences of these loans. The novel devices allowed (1) the holders of forced-loan coupons to use these bonds to pay off debts incurred in customs duties and (2) the holders of bills of exchange involved in the provisioning of the military to use these bills to pay part of their forced loans. Starting with the conceptualisation of the institutional order as a complex system, this paper examines the interactions among the circulation of financial paper bills, the financing of war and changes in the position of the merchants' guild and the legal framework for Atlantic trade. It thereby contributes to renewing institutional change approaches in the Spanish-American context.

The federal government and over thirty states nationwide offer a tax credit in lieu of certain expenditures incurred as part of historic rehabilitation projects. Several economic impact studies have shown the positive effect of the credit on job creation, property values, and environmental friendly behavior in Louisville, KY (Gilderbloom, Hanka & Ambrosius, 2009) and in the state of Maryland (Frizzell & Mitchell, 2002). Most of the studies of historic preservation credits are, however, nonempirical and evaluate only the economic impact of the credit. The societal benefit-cost analysis conducted in this manuscript is the first study of its kind of the Ohio Historic Preservation Tax Credit (OHPTC) program. In addition, this study provides an OHPTC fiscal impact analysis (benefit-cost analysis from the government perspective).

The data for the analysis come from the county auditors’ offices, and multiple proprietary sources, including administrative estimates provided by the agencies managing the OHPTC program, and online survey of the developers. The sensitivity analysis accounts for the differences in discount rates and other factors. The study finds that the overall societal benefits will outweigh overall societal costs by 2023. From the fiscal perspective, the program begins to pay for itself in 2025, but the overall program costs will remain higher than overall benefits during the considered study period (until 2030).

The main goal of the Norwegian pension reform of 2011 is to improve long run fiscal sustainability, not least through stronger labour supply incentives. We assess to what extent the reform is likely to live up to these intentions. To this end we combine a dynamic microsimulation model, which includes a complete description of the Norwegian population and the pension system, with CGE-modelling of the effects on all government revenues and expenditures. We find that the reform is likely to make a great fiscal impact in the long run, and higher employment plays an important role in this respect.

Financial historians have devoted considerable attention to the investment behaviour of urban politicians in the market for public debt in the Low Countries. They have focused not only on how many urban officials invested in annuities, but also why they did so. On the one hand, it has been suggested that political elites often had political and economic motivations for investing in urban annuities. By contrast, historians from the institutional school defend the thesis that inclusive governance led to broader participation in the market for urban credit. A variable that has gone largely unnoticed in explaining investments by the political elite is the impact of the changing composition and social profile of the ruling elites on their investment behaviour. In this article, I examine the case of sixteenth-century Ghent to argue that changes in the city's power structure resulted in profound changes in attitudes towards public debt management. While the old political elite in the early sixteenth century prioritised selling annuities to individuals who belonged to the political networks of their time, the group of political newcomers that dominated urban politics at the end of the sixteenth century had much more of a market-oriented attitude, giving priority to non-political investors in the free market.

In 1878 Chile experienced a banking crisis which brought an end to the Chilean free-banking period based on convertibility initiated in 1860. Using monthly bank balance sheets and other primary sources, I analyze the period and argue that one important explanation for the crisis was the growing relationship between banks and government through state loans to finance fiscal deficits and privileges to the issuing banks. I claim that the crisis emerged from a large bank loan in late 1877 which induced over-issuance and depreciation expectations leading, logically, to a bank run. The Chilean case provides valuable evidence of an element frequently neglected by the free-banking literature: the links between banks and government.

This paper examines the background to calls for further fiscal decentralisation in Scotland in the light of theories of fiscal federalism. In particular, it examines whether spatial differences in preferences, which are central to ‘first generation’ theories of fiscal federalism can be argued to play a central role in the case for granting Scotland further tax and spending powers. ‘Second generation’ theories of fiscal federalism draw attention to the political economy of allocating tax powers to different levels of government. Some of the authors in this strand of theory argue that the case for allocating tax powers to subnational governments can be made in terms of ‘accountability’ – the notion that local politicians can be better held to account for the outcomes of policy actions. Our empirical analysis suggests that there is no clear difference in preferences between Scotland and the rest of the UK along a number of key political dimensions. However, the Scottish parliament enjoys substantially higher levels of trust among the Scottish electorate than does the UK parliament.

Government authorities use resources on information campaigns in order to inform citizens about relevant policy changes. The motivation is usually that individuals sometimes are ill-informed about the public policies relevant for their choices. In a survey experiment where the treatment group was provided with public information material on the social security system, we assess the short- and medium-term knowledge effects. We show that the short run effects of the information on knowledge disappear completely within 4 months. The findings illustrate the limits of public information campaigns to improve knowledge about relevant policy reforms.

Economic issues will be key determinants of the outcome of the Scottish referendum on independence. Pensions are a key element of the economic case for or against independence. The costs of funding pensions in an independent Scotland would be influenced by mortality risks, the costs of borrowing and the segmentation of costs and risks (i.e. pricing to Scotland's experience rather than pooled across UK experience). We compare the overall costs of providing pensions in an independent Scotland against the resources that are available to cover these costs. Scotland has worse mortality experience than the UK as a whole, and Scottish government debt is likely to attract a liquidity premium relative to UK government debt. An independent Scottish government would have to create a bond market for public debt. The liquidity premium would make pensions cheaper to buy, but taxpayers or the consumers of public services would have to pay the cost.

We present the results of a survey experiment where the treatment group was provided with an information brochure regarding recently implemented changes in the Norwegian pension system, whereas a control group was not. We find that those who received the information are more likely to respond correctly to questions regarding the new pension system. The information effect is larger for those with high education, but only for the most complex aspect of the reform. Despite greater knowledge of the reform in the treatment group, we find no differences between the treatment and control group in their preferences regarding when to retire or whether to combine work and pension uptake.

Five years after the financial crisis, the global economy remains unbalanced and many of the advanced countries are still struggling to return to robust, sustainable growth. Taking a historical perspective, I argue that this predicament reflects a failure to adjust to profound changes in the economic landscape, which have given rise to the (re-)emergence of major financial booms and busts. The economic developments that really matter now take much longer to unfold – economic time has slowed down relative to calendar time – and yet the planning horizons of economic agents have shortened. The key problems arise from the cumulative effects of past decisions on stocks, and yet these effects are treated as short-term flow issues. The risk is that instability will become entrenched in the system. Policy needs to adjust.

Ce papier examine l'externalité verticale provenant de l'imposition d'une même base par des gouvernements aux territoires gigognes, phénomène récurrent observé dans la plupart des organiations étatiques et ayant fait l'objet d'un éclairage moins soutenu que celui de concurrence fiscale horizontale. Le modèle étudie un système comportant plusieurs niveaux de dèci-deurs et utilise la théorie des multiprincipaux pour analyser l'optimalité du degré de taxe lorsque plusieurs autorités exercent leur pouvoir fiscal sur une même assiette imposable. Cette théorie permet en effet d'appréhender et de décrire les mécanismes de concurrence entre différents décideurs poursuivant des objectifs propres. Il ressort que le comportement non coopératif de collectivités appartenant à différents niveaux administratifs et partageant une même base fiscale conduit à une hausse du taux de taxation auquel cette base est soumise. Chacun néglige en effet la perte de recettes fiscales qu'il inflige aux autres niveaux de gouvernement etdéfinit donc une taxe supérieure à celle qui correspondrait au coût marginal social. Le taux final d'imposition excède celui qui résulterait de l'exercice par un seul décideur public de la politique fiscale à mettre en oeuvre. Il apparaît en outre que la prise en compte d'une asymétrie d'information exerce un effet dépressif sur le niveau global d'imposition en conauisant chaque échelon à accorder une rente aux firmes, et donc à modérer sa pression fiscale, afin qu'elles révèlent leur information privéeet que puissent être mises en oeuvre les politiques les plus proches d'un optimum social.

Restoring sustainable public finances in the aftermath of the Great Recession is a key challenge in most EU countries. In order to learn from history, our paper examines consolidation episodes in the EU since 1970. We shed light on the factors that favour the start of a consolidation episode and determine its success. Compared to the existing literature, we add a number of new dimensions in the analysis. First, we explore a broader set of potential ingredients of the ‘recipe for success‘, including the quality and strength of fiscal governance and the implementation of structural reforms. Secondly, we check whether the ‘recipe for success’ changed over time. Our analysis broadly confirms received wisdom concerning the conditions triggering a consolidation episode and the role of the composition of adjustment for success, with some qualifications related to the role played by government wages. In addition it provides evidence that well-designed fiscal governance as well as structural reforms improve the odds of both starting a consolidation episode and achieving a lasting fiscal correction. We also show that, over time, successful and unsuccessful consolidation episodes have become more similar in terms of adjustment composition.