We use variation in oil output among Brazilian municipalities to investigate the effects of resource windfalls on government behavior. Oil-rich municipalities experience increases in revenues and report corresponding increases in spending on public goods and services. However, survey data and administrative records indicate that social transfers, public good provision,infrastructure, and household income increase less (if at all) than one might expect given the higher reported spending.

/pdf/do-oil-windfalls-improve-living-standards-evidence-from-295ou3uvhs.pdf

Do Oil Windfalls Improve Living Standards? Evidence from Brazil

Claims that the VAT facilitates tax enforcement by generating paper trails on transactions between firms contributed to widespread VAT adoption worldwide, but there is surprisingly little evidence. This paper analyzes the role of third-party information for VAT enforcement through two randomized experiments among over 400,000 Chilean firms. Announcing additional monitoring has less impact on transactions that are subject to a paper trail, indicating the paper trail's preventive deterrence effect. This leads to strong enforcement spillovers up the VAT chain. These findings confirm that when taking evasion into account, significant differences emerge between otherwise equivalent forms of taxation. (JEL D83, H25, H26, K34, O17)

/pdf/no-taxation-without-information-deterrence-and-self-3f64dop6hu.pdf

No Taxation without Information: Deterrence and Self-Enforcement in the Value Added Tax

We examine the long-run consequences of ethnic partitioning, a neglected aspect of the Scramble for Africa, and uncover the following regularities. First, apart from the land mass and presence of water bodies, historical homelands of split and non-split groups are similar across many observable characteristics. Second, using georeferenced data on political violence, that include both state-driven conflict and violence against civilians, we find that the incidence, severity and duration of violence are higher in the historical homelands of partitioned groups. Third, we shed some light on the mechanisms showing that military interventions from neighboring countries are much more likely in the homelands of split groups. Fourth, our exploration of the status of ethnic groups in the political arena reveals that partitioned ethnicities are systematically discriminated from the national government and are more likely to participate in ethnic civil wars. Fifth, using individual-level data we document that respondents identifying with split groups have lower access to public goods and worse educational outcomes. The uncovered evidence brings in the foreground the detrimental repercussions of ethnic partitioning.

https://papers.ssrn.com/sol3/Delivery.cfm/nber_w17620.pdf?abstractid=1964165&mirid=4

The Long-Run Effects of the Scramble for Africa

Domestic institutions can have profound effects on international trade. This chapter reviews the theoretical and empirical underpinnings of this insight. Particular attention is paid to contracting institutions and to comparative advantage, where the bulk of the research has been concentrated. We also consider the reverse causation running from comparative advantage to domestic institutions.

/pdf/domestic-institutions-as-a-source-of-comparative-advantage-1z5bxfvllx.pdf

Domestic Institutions as a Source of Comparative Advantage

In this paper, I review and assess what we have learned about what motivates individuals to pay – or to not pay – their legally due tax liabilities. I focus on three specific questions. First, what does theory say about what motivates tax compliance? Second, what does the evidence show? Third, how can government use these insights to improve compliance? I conclude with some suggestions – and some predictions – for future research.

/pdf/what-motivates-tax-compliance-59vjv0ovx2.pdf

What motivates tax compliance

This article analyzes the determinants of local institutions in Brazil. We show that institutional quality and distribution of land are partly inherited from the colonial histories experienced by different areas of the country. The sugar cane boom—characterized by an oligarchic society—is associated with more land inequality. The gold boom—characterized by a heavily inefficient presence of the Portuguese state—is associated with worse governance and access to justice. We do not find similar effects for a postcolonial boom (coffee). We also find that the colonial episodes are correlated with lower provision of public goods.

/pdf/institutional-development-and-colonial-heritage-within-1tkjpn1d1b.pdf

Institutional development and colonial heritage within Brazil

Access to third-party information trails is widely believed to be critical to the development of modern tax systems, but there is limited direct evidence of the effects of changes in information trails. This paper investigates the enforcement effect of an increased availability of third-party information, and sheds light on how governments can harness this information despite collusion opportunities. I exploit unique administrative data on firms and consumers from an anti-tax evasion program in Sao Paulo, Brazil (Nota Fiscal Paulista) that created monetary rewards for consumers to ensure that firms report final sales transactions, and establishes an online verification system that aids consumers in whistle-blowing firms. Using variation in intensity of exposure to the policy, I estimate that firms' reported revenue increased by at least 21% over four years. Heterogeneous effects across firms shed light on mechanisms: the results are consistent with fixed costs to conceal collusive deals and positive shifts in detection probability from whistle-blower threats. I also investigate the effect of whistle-blowers directly: firms report 7% more receipts and 3% more revenue after receiving the first consumer complaint. To study the role of the value of rewards in improving enforcement, I show evidence consistent with the possibility that lottery incentives amplify consumer responses due to behavioral biases, which would make it more costly for firms to try to match government incentives in a collusive deal. Finally, I find that although firms significantly adjusted reported expenses, there was an increase in tax revenue net of rewards of 9.3%.

Consumers as Tax Auditors

of Economic Research Volume Title: The Economics of Crime: Lessons for and from Latin America Volume Author/Editor: Rafael Di Tella, Sebastian Edwards, and Ernesto Schargrodsky, editors Volume Publisher: University of Chicago Press Volume ISBN: 0-226-15374-6 (cloth); 0-226-79185-8 (paper) ISBN13: 978-0-226-15374-2 (cloth); 978-0-226-79185-2 (paper) Volume URL: http://www.nber.org/books/dite09-1 Conference Date: November 29-30, 2007 Publication Date: July 2010

http://www.sebh.ecn.br/seminario_5/arquivo1.pdf

Understanding High Crime Rates in Latin America: The Role of Social and Policy Factors

To investigate the enforcement value of third-party information on potentially collusive taxpayers, I study an anti-tax evasion program that rewards consumers for ensuring that firms report sales and establishes a verification system to aid whistle-blowing consumers in Sao Paulo, Brazil (Nota Fiscal Paulista). Firms reported sales increased by at least 21 percent over 4 years. The results are consistent with fixed costs of concealing collusion, increased detection probability from whistle-blower threats, and with behavioral biases associated with lotteries amplifying the enforcement value of the program. Although firms increased reported expenses, tax revenue net of rewards increased by 9.3 percent.

/pdf/consumers-as-tax-auditors-1xfukrpqa4.pdf

This paper analyzes the roots and implications of variations in de facto institutions, within a constant de jure institutional setting. We explore the role of rent-seeking episodes in colonial Brazil as determinants of the quality of current local institutions, and argue that this variation reveals a de facto dimension of institutional quality. We show that municipalities with origins tracing back to the sugar-cane colonial cycle – characterized by a polarized and oligarchic socioeconomic structure – display today more inequality in the distribution of land. Municipalities with origins tracing back to the gold colonial cycle – characterized by an overbureaucratic and heavily intervening presence of the Portuguese state – display today worse governance practices and less access to justice. Using variables created from the rent-seeking colonial episodes as instruments to current institutions, we show that local governance and access to justice are significantly related to long-term development across Brazilian municipalities.

/pdf/rent-seeking-and-the-unveiling-of-de-facto-institutions-1vzafqhpu2.pdf

Joana Naritomi

Papers

Institutional development and colonial heritage within Brazil

Consumers as Tax Auditors

Understanding High Crime Rates in Latin America: The Role of Social and Policy Factors

Consumers as Tax Auditors

Rent Seeking and the Unveiling of 'De Facto' Institutions: Development and Colonial Heritage within Brazil