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Essays in applied economics

Bussy, Adrien (2020) Essays in applied economics. PhD thesis, London School of Economics and Political Science.

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This thesis is composed of three chapters. Chapter 1 investigates the extent to which firms evade taxes on corporate profits by misreporting their imports and exports. I indirectly estimate evasion by studying the co-movements of tax rates and discrepancies between reports by importers and exporters of the same trade flows. I find evidence of significant evasion. To facilitate causal interpretation of the results, I develop a model of the compliance problem of the firm and test several predictions linking firms’ evasion motives to accounting rules, institutional features, and the interaction of the rates of tariff and corporate income tax. Chapter 2 focuses on innovation. We use methods from Natural Language Processing to characterize the innovative content of patents. We develop several metrics that compare inventions to existing and future innovations. The intuition guiding us is that patents dissimilar to past inventions and similar to future ones may have anticipated or started shifts in innovation topics. We find non-causal evidence that such patents have higher citations and the firms owning them grow faster and are more profitable relative to other firms. Analysis of trends suggests that innovative ideas may have gotten harder to find over time in high-innovation fields. Chapter 3 quantifies Value Added Tax (VAT) fraud eliminated by a reform of the European Union VAT rules preventing traders from exploiting a weakness of the system that allowed them to collect VAT without remitting it to the tax authorities. The targeted fraud schemes involve cross-border transactions and result in firms misreporting their transactions, which in turn affects trade statistics. Based on 54 reform episodes, I find that fraud worth up to EUR 1.6 billion annually is removed thanks to the reform. Although large in absolute terms, this only represents a tiny fraction of total VAT revenues in the European Union.

Item Type: Thesis (PhD)
Additional Information: © 2020 Adrien Bussy
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Departments > Economics
Supervisor: Sturm, Daniel and Caselli, Francesco

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