Using two strategies, we show that consumers underreact to taxes that are not salient. First, using a field experiment in a grocery store, we find that posting tax-inclusive price tags reduces demand by 8 percent. Second, increases in taxes included in posted prices reduce alcohol consumption more than increases in taxes applied at the register. We develop a theoretical framework for applied welfare analysis that accommodates salience effects and other optimization failures. The simple formulas we derive imply that the economic incidence of a tax depends on its statutory incidence, and that even policies that induce no change in behavior can create efficiency losses. ( JEL C93, D12, H25, H71)

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Salience and Taxation: Theory and Evidence

The article investigates how social embeddedness affects an organization's acquisition and cost of financial capital in middle-market banking-a lucrative but understudied financial sector Using existing theory and original fieldwork, Author develops a framework to explain how embeddedness can influence which firms get capital and at what cost I then statistically examine my claims using national data on small-business lending At the level of dyadic ties, author finds that firms that embed their commercial transactions with their lender in social attachments receive lower interest rates on loans At the network level, firms are more likely to get loans and to receive lower interest rates on loans if their network of bank ties has a mix of embedded ties and arm's-length ties These network effects arise because embedded ties motivate network partners to share private resources, while arm's-length ties facilitate access to public information on market prices and loan opportunities so that the benefits of different types of ties are optimized within one network Author concludes with a discussion of how the value produced by a network is at a premium when it creates a bridge that links the public information of markets with the private resources of relationships

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Embeddedness in the making of financial capital : How social relations and networks benefit firms seeking financing

This paper uses individual tax returns micro data from 1960 to 1997 to analyze whether taxpayers bunch at the kink points of the U.S. income tax schedule generated by jumps in marginal tax rates. Clear evidence of bunching is found only at the threshold of the rst tax bracket where tax liability starts. Evidence for other kink points is weak or null. The large jumps in marginal tax rates created by the Earned Income Tax Credit generate no bunching for wage earners recipients but substantial bunching for self-employed recipients. In the standard micro-economic model, the amount of bunching should be proportional to the size of the compensated elasticity of earnings with respect to tax rates. We introduce uncertainty and rigidities in labor supply choices to account for the empirical results. Numerical simulations show that, even in those cases, behavioral elasticities consistent with the empirical results are small.

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Do Taxpayers Bunch at Kink Points

Review of international tourism demand models.

Nonlinear pricing and taxation complicate economic decisions by creating multiple marginal prices for the same good. This paper provides a framework to uncover consumers’ perceived price of nonlinear price schedules. I exploit price variation at spatial discontinuities in electricity service areas, where households in the same city experience substantially different nonlinear pricing. Using household-level panel data from administrative records, I find strong evidence that consumers respond to average price rather than marginal or expected marginal price. This suboptimizing behavior makes nonlinear pricing unsuccessful in achieving its policy goal of energy conservation and critically changes the welfare implications of nonlinear pricing. (JEL D12, L11, L94, L98, Q41)

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Do Consumers Respond to Marginal or Average Price? Evidence from Nonlinear Electricity Pricing

This paper examines the incidence and exportability of an ad valorem hotel room occupancy tax for Hawaii vis-a-vis alternative tourist taxes. The study employs a system approach and times series da...

The exportability of hotel occupancy and other tourist taxes

Fujii E. T. and Mak J. (1980) Tourism and crime: implications for regional development policy, Reg. Studies 14, 27–36. This paper investigates the hypothesis that tourism generates environmental externalities in the form of increased crimes against persons and property using annual time series data over the period 1961–1975 and cross-section data for 1975 from the State of Hawaii. We find that an increase in the proportion of tourists in the population results in a significantly greater number of burglaries and rapes than a comparable increase in other population subgroups. The implications of the results for regional development planning of the visitor industry are then explored.

Tourism and crime: Implications for regional development policy

On the Accuracy of Tax Perceptions

(1993) An Empirical Analysis of Preferences for Financial Risk: Further Evidence on the Friedman–Savage Model Journal of Post Keynesian Economics: Vol 16, No 2, pp 197-204

Edwin T. Fujii

Papers

The exportability of hotel occupancy and other tourist taxes

Tourism and crime: Implications for regional development policy

On the Accuracy of Tax Perceptions

An empirical analysis of preferences for financial risk: further evidence on the Friedman-Savage model

The demand for cigarettes: further empirical evidence and its implications for public policy