PUBLICATIONS
How Debit Cards Enable the Poor to Save More, with Paul Gertler, Sean Higgins & Enrique Seira,
Journal of Finance, Forthcoming. NBER Working Paper No 23252, VoxDev Summary.
Size-Dependent Tax Enforcement and Compliance: Global Evidence and Aggregate Implications, with Roberto Fattal Jaef & Anders Jensen, Journal of Development Economics, September 2019. World Bank Policy Research Working Paper 8363.
Digital Financial Services Go a Long Way: Transaction Costs and Financial Inclusion, with Paul Gertler, Sean Higgins & Enrique Seira, American Economic Association Papers and Proceedings, May 2018
Journal of Finance, Forthcoming. NBER Working Paper No 23252, VoxDev Summary.
Size-Dependent Tax Enforcement and Compliance: Global Evidence and Aggregate Implications, with Roberto Fattal Jaef & Anders Jensen, Journal of Development Economics, September 2019. World Bank Policy Research Working Paper 8363.
Digital Financial Services Go a Long Way: Transaction Costs and Financial Inclusion, with Paul Gertler, Sean Higgins & Enrique Seira, American Economic Association Papers and Proceedings, May 2018
WORKING PAPERS
Not(ch) Your Average Tax System: Corporate Taxation Under Week Enforcement, with Mauricio Soto. August 2019.
Revise and Resubmit, AEJ: Economic Policy. World Bank Policy Research Working Paper 8524, Paper in Estado de la Nacion.
Revise and Resubmit, AEJ: Economic Policy. World Bank Policy Research Working Paper 8524, Paper in Estado de la Nacion.
[REVISED] Informality, Consumption Taxes and Redistribution with Lucie Gadenne & Anders Jensen. May 2020.
Replication Codes.
Replication Codes.
WORK IN PROGRESS
Tax Incidence in the Presence of an Informal Sector: Evidence from the VAT in Mexico, with Lucie Gadenne, Anders Jensen & Mariana Racimo
The Value-Added Tax (VAT) is a major source of tax revenues in developing countries. Existing literature has considered the incidence of the VAT in rich countries but there is virtually no evidence from developing countries where the presence of an informal (non-taxed) sector may significantly alter the welfare impacts of VAT reforms. If for example consumers can easily substitute between formal and informal retailers a bigger share of the incidence will fall on formal firms; in contrast if substitutability is low a larger share of the burden may be shifted onto formal consumers. How much firms shift the incidence on workers will similarly depend on the structure of competition between formal and informal firms in labor markets. In this paper, we study the incidence of a reform which substantially increased the VAT in border regions of Mexico in 2014. We combine rich administrative data on the universe of retailers from different sources; these enable us to categorize each retailer as formal or informal using information on VAT payments, and observe firm-level prices, sales, profits and employment. On-going work aims to quantify how much of the tax increase is paid by workers, firms and consumers in the formal and informal sectors, and use our estimates to speak to the nature of competition between those sectors in different markets.
The Value-Added Tax (VAT) is a major source of tax revenues in developing countries. Existing literature has considered the incidence of the VAT in rich countries but there is virtually no evidence from developing countries where the presence of an informal (non-taxed) sector may significantly alter the welfare impacts of VAT reforms. If for example consumers can easily substitute between formal and informal retailers a bigger share of the incidence will fall on formal firms; in contrast if substitutability is low a larger share of the burden may be shifted onto formal consumers. How much firms shift the incidence on workers will similarly depend on the structure of competition between formal and informal firms in labor markets. In this paper, we study the incidence of a reform which substantially increased the VAT in border regions of Mexico in 2014. We combine rich administrative data on the universe of retailers from different sources; these enable us to categorize each retailer as formal or informal using information on VAT payments, and observe firm-level prices, sales, profits and employment. On-going work aims to quantify how much of the tax increase is paid by workers, firms and consumers in the formal and informal sectors, and use our estimates to speak to the nature of competition between those sectors in different markets.
Towards a Cashless Economy? Evidence from the Elasticity of Cash Deposits in Mexico, with Anders Jensen & Sean Higgins. (SLIDES AVAILABLE UPON REQUEST)
Economies are increasingly becoming cashless. Since cash is an anonymous transaction technology, this trend presents an opportunity to increase tax compliance and reduce criminal activity. Whether governments should encourage the transition towards digital payment technologies depends on the elasticity of firms' behavior with respect to the costs of cash vs. other payment technologies. We exploit two natural experiments to estimate this elasticity. First, in 2014 the Mexican government repealed a tax on cash deposits above a threshold. Second, a large commercial bank in Mexico imposes a notch in its fee structure for firms accepting card payments using point-of-sale (POS) terminals. Using data from a large commercial bank on (i) monthly deposits of a sample of firms and (ii) 3.5 billion card transactions from the universe of firms with POS terminals from that bank, we estimate firms' elasticity between payment/deposit technologies. We find that firms are highly elastic to the cost of using cash through the formal financial system, but mostly substitute to keeping cash on hand rather than to electronic payment technologies. This implies that the transaction costs of digital payment technologies are an important barrier to implementing policies that encourage the transition towards a cashless economy.
Economies are increasingly becoming cashless. Since cash is an anonymous transaction technology, this trend presents an opportunity to increase tax compliance and reduce criminal activity. Whether governments should encourage the transition towards digital payment technologies depends on the elasticity of firms' behavior with respect to the costs of cash vs. other payment technologies. We exploit two natural experiments to estimate this elasticity. First, in 2014 the Mexican government repealed a tax on cash deposits above a threshold. Second, a large commercial bank in Mexico imposes a notch in its fee structure for firms accepting card payments using point-of-sale (POS) terminals. Using data from a large commercial bank on (i) monthly deposits of a sample of firms and (ii) 3.5 billion card transactions from the universe of firms with POS terminals from that bank, we estimate firms' elasticity between payment/deposit technologies. We find that firms are highly elastic to the cost of using cash through the formal financial system, but mostly substitute to keeping cash on hand rather than to electronic payment technologies. This implies that the transaction costs of digital payment technologies are an important barrier to implementing policies that encourage the transition towards a cashless economy.
Audit Selection under Weak Fiscal Capacity: A Field Experiment in Senegal, with Anne Brockmeyer, Alipio Ferreira & Bassirou Sarr, AEA RCT REGISTRY
Should low-income countries leave discretion to tax inspectors to select firms for audit or should selection be determined by risk-scoring algorithms? Does the optimal amount of discretion depend on the quantity of third-party information available and its ease of access for tax inspectors? In a context with weak fiscal capacity, leveraging inspectors’ private information could be valuable but opens the door to discrimination and corruption. This project tests which selection method (discretionary inspector selection or algorithm selection based on risk scores) is most effective in detecting firm non-compliance and increasing audit yield. An experiment in collaboration with the tax administration in Senegal is currently in the field.
Should low-income countries leave discretion to tax inspectors to select firms for audit or should selection be determined by risk-scoring algorithms? Does the optimal amount of discretion depend on the quantity of third-party information available and its ease of access for tax inspectors? In a context with weak fiscal capacity, leveraging inspectors’ private information could be valuable but opens the door to discrimination and corruption. This project tests which selection method (discretionary inspector selection or algorithm selection based on risk scores) is most effective in detecting firm non-compliance and increasing audit yield. An experiment in collaboration with the tax administration in Senegal is currently in the field.
