Individuals care about how they are perceived by others, and take visible actions to signal their type. This paper investigates social signaling in the context of childhood immunization in Sierra Leone. Despite high initial vaccine take-up, many parents do not complete the five immunizations that are required in a child’s first year of life. I introduce a durable signal - in the form of differently colored bracelets - which children receive upon vaccination, and implement a 22-month-long experiment in 120 public clinics. Informed by theory, the experimental design separately identifies social signaling from leading alternative mechanisms. In a first main finding, I show that individuals use signals to learn about others’ actions. Second, I find that the impact of signals varies significantly with the social desirability of the action. In particular, the signal has a weak effect when linked to a vaccine with low perceived benefits and a large, positive effect when linked to a vaccine with high perceived benefits. Of substantive policy importance, signals increase timely and complete vaccination at a cost of 1 USD per child, with effects persisting 12 months after the roll out. Finally, I structurally estimate a dynamic discrete-choice model to quantify the value of social signaling.
This paper studies individual responses to wealth taxes and wealth tax enforcement using Colombian tax return microdata from 1993 to 2016 linked with the leaked "Panama Papers." We estimate elasticities of reported wealth with respect to (one minus) the wealth tax rate, exploiting discrete jumps in wealth tax liability and reforms varying exemption cutoffs and tax rates. We find clear evidence of immediate bunching responses to wealth taxes; individuals lower their reported wealth to reduce their tax burden. These immediate responses predominantly reflect avoidance and evasion, such as misreporting wealth items subject to less third-party reporting. In our main analysis, the short-term elasticity of reported wealth is two, and behavioral responses reduce revenues by up to one-fifth of projected revenues. We complement this analysis by studying offshore sheltering in Colombia’s most relevant tax havens. We show that offshore entities are predominantly used by the wealthiest taxpayers at least in part to hide assets from the tax authority. Finally, we show that better enforcement helps recover tax on offshore wealth. A voluntary disclosure scheme taking place between 2015 and 2017 encouraged evaders to disclose 1.7 percent of GDP in hidden wealth. Two-fifths of individuals in the wealthiest 0.01 percent disclosed under the scheme—disproportionately reporting concealed foreign assets—and, as a result, pay more taxes. Halfway through the scheme, the Panama Papers news story broke, shocking perceived detection probabilities and raising disclosures by more than 800 percent. This, possibly coupled with harsher noncompliance sanctions, contributed to improving wealth tax collection and enhancing tax progressivity at the top.
Do tax systems distort firm-to-firm trade? This paper considers the effect of tax policy on supplier networks in a large developing economy: the state of West Bengal in India. Using administrative panel data on firms including transaction data for 4.8 million supplier-client pairs, we first document substantial segmentation of supply chains between firms paying Value-Added Taxes (VAT) and non-VAT-paying firms. We then develop a model of firms’ sourcing and tax decisions within supply chains to understand
the mechanisms through which tax policy interacts with supply networks. The model predicts equilibrium (partial) segmentation because of both supply-chain distortions (taxes affect how much firms trade with each other) and strategic complementarities
in firms’ tax choices. Finally, we test the model’s predictions using variations over time within-firm and within supplier-client pairs. We find that the tax system distorts firms’ sourcing decisions, and suggestive evidence of strategic complementarities in firms’ tax choices within supplier networks.