RT Dissertation/Thesis
T1 Essays in dynamic public finance
A1 Bagirgan, Onursal
AB An upcoming trend in public finance is applying economic theory to understand how privateagents' incentives, expectations, and perceptions affect the efficiency and sustainability ofgovernment policies. This doctoral dissertation presents novel studies that fall into this category.The first three chapters examine many aspects of tax amnesties from this perspective,while the last chapter studies intergenerational risk-sharing under limited enforcement.The first chapter introduces a selection of stylized facts about tax amnesties by examiningthe recent state-level tax amnesty experiences in the US. We provide observationalevidence on the heterogeneity of tax amnesty implementations among US states. The heterogeneityis also persistent throughout the last four decades. We show that a few statesdeclaring amnesties very rarely in the 80s and 90s start to implement amnesties much morefrequently in recent decades. We also observe that the tax amnesty declarations of US statescluster around the US recession periods.The second chapter introduces a theoretical framework to investigate the strategicinteraction between a government and taxpayers in an economy. Our model predicts fourfactors that make a tax amnesty more likely in an economy: high personal income; high taxrates; low political cost for declaring an amnesty; and low audit rates. We examine US stateleveldata to test this prediction and show that the states with high personal income andhigh tax rates are using tax amnesties more frequently. We also show that the self-fulfillingcharacteristic of tax amnesties may lead to sub-optimal outcomes under lack of commitment.In the third chapter, we present a theoretical framework to explain the recurring natureof tax amnesties. We construct a model with the strategic interaction of a government anda mass of taxpayers. The government and the taxpayers interact repeatedly, and each interactioncan result in a tax amnesty. We show that an amnesty can cause another amnestyin the near future by altering taxpayers' beliefs about unobservable government characteristics.Therefore, an economy may get into a sequence of successive tax amnesties througha reputational channel referred to as an "expectation trap." The expectation trap mechanismcan explain the series of tax amnesties in some US states that rarely experienced taxamnesties in the past. Extending our baseline model shows that a recession may cause a tax amnesty, which can trigger a sequence of further amnesties that can spread into the yearsafter recovery from the recession.In the fourth chapter, we study the sustainable intergenerational insurance schemes underlack of enforcement. The welfare improving insurance policies may not be implementableunder limited enforcement since any agent can opt-out of the insurance scheme if it doesnot benefit her. We develop a 2-period overlapping generations model to study the impactof different government policies. A standard tax-and-transfer scheme cannot provide perfectrisk-sharing. To improve intergenerational risk sharing, we first introduce money into thesystem. We show that introducing money into the baseline model may improve risk-sharing.We also investigate the possibility of providing further risk-sharing by using monetary policy.We show that a monetary policy rule improves welfare under a numerical example.
YR 2022
FD 2022-01
LK https://hdl.handle.net/10016/34542
UL https://hdl.handle.net/10016/34542
LA eng
DS e-Archivo
RD 1 sept. 2024