"Don’t Blame the Messenger. A Field Experiment on Delivery Methods for Increasing Tax Compliance" (w/D. Ortega).
Abstract: Does the method a government use to communicate with its citizens affect the effectiveness of public policies? For example, does the delivery mechanism of messages to tax delinquents affect tax compliance? This study reports the results of a field experiment in Colombia that varies the way the National Tax Agency contacts taxpayers on payments due for income, value added, and wealth taxes. More than 20,000 were randomly assigned to a control or one of three delivery mechanisms. Results indicate large and highly significant effects, as well as sizable dif- ferences across delivery methods. A personal visit by an inspector is more effective than a letter or an email, conditional on delivery. The findings allow showing that agencies are leaving plenty of money on the table, and arguing about the optimal deterrence strategy. They highlight also that the mechanism through which policies are informed and publicized should not be neglected from the policy debate.
"Do Rewards Work? Evidence from the Randomization of Public Works" (w/P. Carrillo, and E. Castro)
Abstract: In the behavioral economics literature, rewards and positive inducements have been shown to gen- erate incentives for good behavior but their success is not independent of their design. Some rewards backfire by crowding out intrinsic motivations, and some that do work have short effects, and affect only the intended recipient. Finding a better reward seems to be of outmost importance, particularly because positive inducements are becoming an instrument widely used by policymakers. In this paper, we test the effect of positive inducements by making use of a randomized experiment in which a Municipal- ity of Argentina awarded randomly the construction of 400 individual sidewalks among the more than 72,000 taxpayers who had complied with the payment of their property tax. Results indicate that: (i) being selected in the lottery and publicly recognized by the government for good behavior has a positive but not persistent effect; (ii) receiving the sidewalk has a large positive and persistent effect (for at least 3 years after the intervention); (iii) there are high and persistent spillover effects. Now, some of the neighbors of those who receive the reward comply more too and these effects can be even larger than the direct effects. Consequently, this type of reward seems to outperform other attempts of providing positive inducements. The key difference is the provision of a durable and visible good that helped to crowd in intrinsic motivations (through reciprocity and peer-effects). Overall, these results have relevant implications for the literature and for policymakers as they provide evidence about the features that make a reward successful be that for tax compliance or for other policy purposes.
"Do Particularistic Institutions Lead to Inefficient Policies? Evidence from Taxation in Latin America" (w/M. Hallerberg) submitted
Abstract: This paper investigates the determinants of reforms that increase or decrease tax neutrality in Latin America during the period 1990-2004. It takes advantage of a new dataset that focuses on actual changes to the tax code. We consider several possible causes of such reforms, including partisanship, legislative and presidential elections, inflation, per capita income, and financial crises. Our main focus, however, is on the extent of the “personal vote” in the lower house of the legislature. We anticipate that the greater the personal vote, the more likely there will be tax reforms that reduce the overall neutrality of a country’s tax system. Our results suggest that tax incentives for specific constituencies were more common under more particularistic electoral systems. Reforms that broadened the tax base and made the system more neutral were more common during financial crises, though when a legislative election was close this result no longer held.
"Who’s calling? The effect of phone calls as a deterrence mechanism" (w/D. Ortega)
Abstract: There is an ample literature that focuses on the determinants of tax compliance. Several field experiments have evaluated the effect and comparative relevance of sending deterrence and moral suasion messages to taxpayers. Absent from the discussion so far has been evaluating the effect of different delivery mechanisms of those messages. We conduct a field experiment in Colombia in which we vary the way the National Tax Agency contacts taxpayers with due payments for income, value added, and wealth taxes. More than 34,000 taxpayers were randomly assigned to a control, or they were contacted by phone by the agency. Results indicate large and highly significant effects for increasing the payment of due taxes. These effects are higher than those usually obtained through the use of letters. The results in this paper have ample implications for the literature and for policy design. The experiment allows having the first estimates of the efficiency and effectiveness of using phone calls instead of letters, to argue about optimal enforcement strategies, and it sets the stage for further theoretical and empirical work. Moreover, it also provides evidence on the effectiveness of phone calls that could be compared to those in the get out the vote literature.
"Property taxation and noncompliance: Evidence from high-frequency panel data" (w/C. Traxler)
Abstract: This project studies property tax noncompliance in a large city in Argentina. We exploit a complex tax reform. The reform implied a series of quarterly or bi- annually nominal tax increases (or decreases) over a period of more than three years. We measure the behavioral responses to within-variation in property taxes using high-frequency panel data on the timing of the payment (and non- payment) of the monthly tax bills for all households and property owners in the city. Preliminary results from two-way fixed effects estimates indicate that higher (real) taxes lead to more delayed tax-payments and an increase in the rate of non-payment. Quantitatively, however, these effects are small on average. Studying heterogeneity of responses according to property values, we find much stronger responses for smaller and less valuable properties. In a second step, we analyze social-interaction effects. Using within-variation in a district’s minimum-tax level, we find that “unaffected” property owners respond to (minimum-tax induced) increases in non-compliance rates in their block. Using an updated wave of data we will substantiate this observation and translate our estimates into a social multiplier of non-compliance.
"Government Behavioral-Contingent Responses and Tax Compliance. Evidence from a Field Experiment"
Abstract: Tax evasion is a common feature in developing countries, due in part to low enforcement capacity and to a lower effect from moral determinate such as reciprocity with the State. Previous research has concentrated on one-shot interactions between the tax authority and taxpayers. In that setting, deterrence and moral messages affected tax compliance, and results tended to fade over time. One reason why these effects fade over time is that no changes occur in the long-term relationship between those who pay and those who collect taxes because of this sporadic interaction. In this project, a large scale field experiment in a Municipality in Argentina, we introduced a design in which the government's response changes over time according to the taxpayers behavior. As such, the taxpayer has a continuous feedback from the results of her actions. Those who pay are acknowledged and those who don't are reminded of their obligation. Consequently, our project tests the impact of an innovative experimental design that alternates the provision of positive and deterrence messages contingent on taxpayers’ compliance behavior.
Field Experiment in the City of Managua (Nicaragua): Enhancing tax compliance at the local level: information, collective action and the political costs of tax enforcement (w/M. Ardanaz and P. Keefer)
Field Experiment in the City of Santa Fé (Argentina): Deterrence Messages, Reminder, and Due Dates (w/C. Traxler)
Field Experiment in the City of Pilar (Argentina): Trust, Public Goods, and tax Compliance
Field Experiment in the City of Buenos Aires (Argentina): Tax Declarations and Third Party Reporting
Field Experiment with Aguas de Quito (water service provider) in Quito, Ecuador: Transparency, Payments, and Water Consumption (w/P. Carrillo)
Field Experiment in Mexico City: Pollution, Information, and the Demand of Public Policies (w/B. Hoffman)
Survey Experiment on the Politics of Crime (w/D. Gingerich)
Age Eligibility, Elections, and Information Gathering (w/R. Vlaicu)