NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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In-Kind Taxes, Behavior, and Comparative Advantage

Casey B. Mulligan

NBER Working Paper No. 21586
Issued in September 2015
NBER Program(s):Law and Economics, Labor Studies, Public Economics

This paper treats taxation in kind (IKT) as an example of price regulation, emphasizing IKT-avoidance behavior, and its interactions with the other costs of price controls. This emphasis fundamentally changes efficiency conclusions, and adds new ones. IKTs do not in fact randomly sample suppliers. Large-scale IKTs, and not small-scale ones, may have especially large average efficiency costs. Ransoms or “commutation fees” are an IKT policy option, but are only efficiency enhancing in specific situations: more heterogeneity among suppliers, and avoidance technologies that result in avoidance behaviors that are poor signals of a supplier’s opportunity cost. Avoidance behaviors are one reason why the social costs of wars and other public projects involving IKTs may have been underestimated.

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Document Object Identifier (DOI): 10.3386/w21586

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