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Essays on behavioral responses to social insurance and taxation

Seibold, Arthur (2018) Essays on behavioral responses to social insurance and taxation. PhD thesis, London School of Economics and Political Science.

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Identification Number: 10.21953/lse.c1cvir3r18h1


This thesis contains three essays on behavioral responses to social insurance and taxation. The first chapter documents and analyzes an important and puzzling stylized fact about retirement behavior: the large concentration of job exits at specific ages. In Germany, almost 30% of workers retire precisely in the month when they reach one of three “statutory” retirement ages, although there is often no incentive or even a disincentive to retire at these thresholds. To study what can explain the concentration of retirements around statutory ages, I use novel administrative data covering the universe of German retirees, and I take advantage of unique variation in retirement incentives as well as in the location of statutory ages across individuals created by the German pension system. Measuring retirement bunching responses to 644 different discontinuities in pension benefit profiles, I first document that financial incentives alone fail to explain retirement patterns in the data. Second, I show that there is a direct effect of “presenting” a threshold as a statutory age, which is substantially larger than that of financial incentives. Further evidence on mechanisms suggests the framing of statutory ages as reference points for retirement as an explanation. A number of alternative channels including firm responses are also discussed but they do not seem to drive the results. The second chapter analyzes bunching responses around reference points and argues that bunching methods are naturally suited to quantify reference-dependent preferences. Using a standard labor supply model, the workhorse of the bunching literature, I first show that different types of reference dependence all have a key prediction in common: They imply sharp bunching of the outcome at the reference point. Observed bunching can be linked to underlying parameters, which motivates both structural and reduced-form estimation methods to implement an empirical bunching approach to reference dependence. Finally, I present two applications in the context of retirement decisions. First, I find significant bunching responses at a type of “pure” reference point, namely round retirement ages. Second, I complement the analysis from chapter 1 with structural estimation and find a quantitatively important role of reference dependence at statutory retirement ages. Counterfactual simulations highlight that shifting statutory ages via pension reforms can be an effective policy to increase actual retirement ages with a positive fiscal impact. The third chapter turns to a topic from the realm of taxation. Modern systems of firm taxation typically feature a combination of payroll, valued-added, and corporate income taxes. However, they often exist alongside special presumptive tax regimes targeted at small and medium enterprises (SME), such as a single turnover tax. This chapter uses novel administrative data from S˜ao Paulo (Brazil), including data on inter-firm trade, to shed light on the effects of such dual tax systems on firm growth, market competition, and production decisions. First, we show that the firm size distribution is distorted by the eligibility threshold for the presumptive tax system. Second, ineligible (larger) firms are adversely affected by reductions in the tax and compliance burden for SME. Third, we study the relationship between tax systems and production choices. The presumptive tax mainly replaces a payroll tax and a value-added tax by a turnover tax in our context. Accordingly, we find that firms in the presumptive tax regime use relatively more labor input and source more of their intermediate input from other firms in the same regime. This leads to partial segmentation of the trade network between firms in the two systems. We show that heterogeneity in firm production choices drives part of these correlations, but there is also a causal effect of tax regimes on input choices.

Item Type: Thesis (PhD)
Additional Information: © 2018 Arthur Seibold
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
Sets: Departments > Economics
Supervisor: Landais, Camille and Kleven, Henrik Jacobsen

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