Presented By: Department of Economics
Health, History, Demography & Development (H2D2): Tax Burden on the Informal Economy
Teju Velayudhan, Obeid Rehman
Obeid Rehman
Title: Migrant-Household Communication and Information Sharing
Abstract: In household decision making, strategic use of private information by spouses is often considered a source of inefficient outcomes. For transnational households – where one spouse temporarily migrates for work – this information asymmetry is further exacerbated, and can reduce the development impact of such migration. However the role of household communication and information sharing to create and/or address this information asymmetry is unclear. I plan to conduct an RCT to study the effect of making information observable on migrant-household information sharing and the household’s decision making. I will analyze whether spouses strategically misreport information to each other, which margins are most misreported (income, expenditure, savings, debt etc.) and does the opportunity to share information reduce asymmetry and affect the household’s subsequent decisions.
Teju Velayudhan
Title: Do Value Added Taxes Thresholds Reduce Real Output?
Abstract: Most countries have a value added tax (VAT) and most VAT systems feature a revenue based exemption threshold, making the VAT notch a widespread and important element of tax systems. How do these VAT notches affect production efficiency, and therefore the production efficiency of real VAT systems? This is a particularly relevant question in the context of emerging economies where the VAT exemption threshold is relatively high in the revenue distribution of firms. Recent papers estimate large responses of reported production to tax in developing countries in response to tax incentives and attribute the response to evasion. Unlike these papers which use administrative data from tax returns, I use survey data where what firms report has no direct impact on their tax liability. Even in this survey data, I find that firms reduce their survey-reported output between 6 to 20 percent to remain below the VAT exemption threshold. Because the survey-reported output may also be the outcome of misreporting instead of real production changes, I devise a method to identify real changes using information on their tax-exempt inputs, which they never report to the tax authority. I assemble a novel dataset by linking the five-digit product information from these establishments to the applicable tariff codes, which allows me to measure how the tax liability for the firm changes over time.
Title: Migrant-Household Communication and Information Sharing
Abstract: In household decision making, strategic use of private information by spouses is often considered a source of inefficient outcomes. For transnational households – where one spouse temporarily migrates for work – this information asymmetry is further exacerbated, and can reduce the development impact of such migration. However the role of household communication and information sharing to create and/or address this information asymmetry is unclear. I plan to conduct an RCT to study the effect of making information observable on migrant-household information sharing and the household’s decision making. I will analyze whether spouses strategically misreport information to each other, which margins are most misreported (income, expenditure, savings, debt etc.) and does the opportunity to share information reduce asymmetry and affect the household’s subsequent decisions.
Teju Velayudhan
Title: Do Value Added Taxes Thresholds Reduce Real Output?
Abstract: Most countries have a value added tax (VAT) and most VAT systems feature a revenue based exemption threshold, making the VAT notch a widespread and important element of tax systems. How do these VAT notches affect production efficiency, and therefore the production efficiency of real VAT systems? This is a particularly relevant question in the context of emerging economies where the VAT exemption threshold is relatively high in the revenue distribution of firms. Recent papers estimate large responses of reported production to tax in developing countries in response to tax incentives and attribute the response to evasion. Unlike these papers which use administrative data from tax returns, I use survey data where what firms report has no direct impact on their tax liability. Even in this survey data, I find that firms reduce their survey-reported output between 6 to 20 percent to remain below the VAT exemption threshold. Because the survey-reported output may also be the outcome of misreporting instead of real production changes, I devise a method to identify real changes using information on their tax-exempt inputs, which they never report to the tax authority. I assemble a novel dataset by linking the five-digit product information from these establishments to the applicable tariff codes, which allows me to measure how the tax liability for the firm changes over time.
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