An experimental analysis of tax avoidance policies

Policies to reduce aggressive tax avoidance are increasingly being implemented or discussed in many countries around the world. Tax authorities hope that such policies will generate new tax revenue by increasing overall tax compliance. We present an experimental design to investigate the effect of a stylized anti-avoidance tax policy on tax compliance behavior. We highlight that anti-avoidance tax policies that reduce tax avoidance can also induce an increase in tax evasion (“substitution effect”), which limits the additional tax revenue these policies will generate. We show that the degree of substitution depends crucially on behavioral factors such as tax morale. Policymakers therefore also need to consider behavioral features while designing such policies and estimating their potential effects.     

FEMALE ENTREPRENEURSHIP IN EARLY ISLAM

The absence of female leaders in business and public life is conspicuous in Islamic societies. One explanation may be that Islam imposes legal and social inequality on men and women. However, a comparison of female entrepreneurship in pre‐Islamic society and in Mohammed's era shows that women occupied leadership roles before and after the establishment of Islam. Mohammed's wives were commercially astute, and Mohammed and his contemporaries respected the rights of women to make decisions regarding finances, matrimony and religious affiliation. The right of women to assume public leadership roles is compatible with Islam.     

The Thirteenth‐Century Economics of Thomas Aquinas

In the Middle Ages, discourse on economics, such as it was, proceeded for the most part as an application of theological doctrine. But economic analysis as an independent discipline per se was taking shape in thirteenth‐century scholasticism. This is shown by a review of relevant sections of Thomas Aquinas’ Summa theologiae regarding property rights and the division of labour; wealth and income policies; consumer protection and fair trade; and the distinction between usurious and licit financial returns.     

Commodity prices and growth: An empirical investigation

Whereas empirical evidence on the effect of higher commodity prices on the long-run growth of commodity exporters is ambiguous, time series analyses using vector autoregressive (VAR) models have found that commodity booms raise income in the short run. In this paper we adopt panel error correction methodology to analyze global data for 1963 to 2008 to disentangle the short and long run effects of international commodity prices on output per capita. Our results show that commodity booms have unconditional positive short-term effects on output, but non-agricultural booms in countries with poor governance have adverse long-term effects which dominate the short-run gains. Our findings have important implications for non-agricultural commodity exporters with poor governance, especially in light of the recent wave of resource discoveries in low-income countries.     

Do high interest rates defend currencies during speculative attacks? New evidence

Kraay [Kraay, A., 2003. Do high interest rates defend currencies during speculative attacks? Journal of International Economics 59, 297-321.] documents the lack of any systematic association between monetary policy and the outcome of a speculative attack. This paper revisits Kraay's work and modifies it by introducing an improved measure of monetary policy and an additional country-specific fundamental, short-term corporate debt, to capture balance sheet vulnerabilities emphasized by the recent currency crises literature. The results show that for low levels of short-term corporate debt, raising interest rates lowers the probability of a successful attack. This effect decreases and eventually reverses for higher levels of debt. These findings contrast earlier empirical evidence and imply a fundamental reconsideration of the role of monetary policy during currency crises.     

LICENCE VALUES IN TAXI MARKETS

Wherever taxi regulators cap the number of taxis, operating licences acquire economic value. In the UK, the Office of Fair Trading recommended legislative repeal of quantity caps, but the status quo continues. This article argues that licence values send an important signal to taxi regulators.     

The Effect of Monetary Policy on Exchange Rates during Currency Crises: the Role of Debt,Institutions, and Financial Openness*

This paper empirically examines the effect of monetary policy on exchange rates during currency crises. We find strong evidence that raising the interest rate: (i) has larger adverse balance sheet effects and is therefore less effective in countries with high domestic corporate short‐term debt; (ii) is more credible and therefore more effective in countries with high‐quality institutions; (iii) is more credible and therefore more effective in countries with high external debt; and (iv) is less effective in countries with high capital account openness. Our results support the idea that the effect of monetary policy depends on its impact on fundamentals, as well as its credibility, as suggested in the recent theoretical literature.