Tax evasion, inequality, and progressive taxes : a political economy perspective

The standard approach to tax compliance applies the economics-of-crime methodology pioneered by Becker (1968): in its first application, due to Allingham and Sandmo (1972) it models the behaviour of agents as a decision involving a choice of the extent of their income to report to tax authorities, given a certain institutional environment, represented by parameters such as the probability of detection and penalties in the event the agent is caught. While this basic framework yields important insights on tax compliance behavior, it has some critical limitations. Specifically, it indicates a level of compliance that is significantly below what is observed in the data. This thesis revisits the original framework with a view towards addressing this issue, and examining the political economy implications of tax evasion for progressivity in the tax structure. The approach followed involves building a macroeconomic, dynamic equilibrium model for the purpose of examining these issues, by using a step-wise model building procedure starting with some very simple variations of the basic Allingham and Sandmo construct, which are eventually integrated to a dynamic general equilibrium overlapping generations framework with heterogeneous agents. One of the variations involves incorporating the Allingham and Sandmo construct into a two-period model of a small open economy of the type originally attributed to Fisher (1930). A further variation of this simple construct involves allowing agents to initially decide whether to evade taxes or not. In the event they decide to evade, the agents then have to decide the extent of income or wealth they wish to under-report. We find that the ‘evade or not’ assumption has strikingly different and more realistic implications for the extent of evasion, and demonstrate that it is a more appropriate modeling strategy in the context of macroeconomic models, which are essentially dynamic in nature, and involve consumption smoothing across time and across various states of nature. Specifically, since deciding to undertake tax evasion impacts on the consumption smoothing ability of the agent by creating two states of nature in which the agent is ‘caught’ or ‘not caught’, there is a possibility that their utility under certainty, when they choose not to evade, is higher than the expected utility obtained when they choose to evade. Furthermore, the simple two-period model incorporating an ‘evade or not’ choice can be used to demonstrate some strikingly different political economy implications relative to its Allingham and Sandmo counterpart. In variations of the two models that allow for voting on the tax parameter, we find that agents typically choose to vote for a high degree of progressivity by choosing the highest available tax rate from the menu of choices available to them. There is, however, a small range of inequality levels for which agents in the ‘evade or not’ model vote for a relatively low value of the tax rate. The final steps in the model building procedure involve grafting the two-period models with a political economy choice into a dynamic overlapping generations setting with more general, non-linear tax schedules and a ‘cost-of evasion’ function that is increasing in the extent of evasion. Results based on numerical simulations of these models show further improvement in the model’s ability to match empirically plausible levels of tax evasion. In addition, the differences between the political economy implications of the ‘evade or not’ version of the model and its Allingham and Sandmo counterpart are now very striking; there is now a large range of values of the inequality parameter for which agents in the ‘evade or not’ model vote for a low degree of progressivity. This is because, in the ‘evade or not’ version of the model, low values of the tax rate encourages a large number of agents to choose the ‘not-evade’ option, so that the redistributive mechanism is more ‘efficient’ relative to the situations in which tax rates are high. Some further implications of the models of this thesis relate to whether variations in the level of inequality, and parameters such as the probability of detection and penalties for tax evasion matter for the political economy results. We find that (i) the political economy outcomes for the tax rate are quite insensitive to changes in inequality, and (ii) the voting outcomes change in non-monotonic ways in response to changes in the probability of detection and penalty rates. Specifically, the model suggests that changes in inequality should not matter, although the political outcome for the tax rate for a given level of inequality is conditional on whether there is a large or small or large extent of evasion in the economy. We conclude that further theoretical research into macroeconomic models of tax evasion is required to identify the structural relationships underpinning the link between inequality and redistribution in the presence of tax evasion. The models of this thesis provide a necessary first step in that direction.

Economic growth and inequality patterns in the presence of costly technology adoption and uncertainty

We develop a stochastic endogenous growth model to explain the diversity in growth and inequality patterns and the non-convergence of incomes in transitional economies where an underdeveloped financial sector imposes an implicit, fixed cost on the diversification of idiosyncratic risk. In the model endogenous growth occurs through physical and human capital deepening, with the latter being the more dominant element. We interpret the fixed cost as a ‘learning by doing’ cost for entrepreneurs who undertake risk in the absence of well developed financial markets and institutions that help diversify such risk. As such, this cost may be interpreted as the implicit returns foregone due to the lack of diversification opportunities that would otherwise have been available, had such institutions been present. The analytical and numerical results of the model suggest three growth outcomes depending on the productivity differences between the projects and the fixed cost associated with the more productive project. We label these outcomes as poverty trap, dual economy and balanced growth. Further analysis of these three outcomes highlights the existence of a diversity within diversity. Specifically, within the ‘poverty trap’ and ‘dual economy’ scenarios growth and inequality patterns differ, depending on the initial conditions. This additional diversity allows the model to capture a richer range of outcomes that are consistent with the empirical experience of several transitional economies.

(Neo)Liberal doses of inequality : advance Australia where?

The relationship between social background and achievement has preoccupied educational researchers since the mid-20th century with major studies in the area reaching prominence in the late 60s. Despite five decades of research and innovation since, recent studies using OECD data have shown that the relationship is strengthening rather than weakening. In this paper, the systematic destabilisation of public education in Australia is examined as a philosophical problem stemming from a fundamental shift in political orientation, where “choice” and “aspiration” work to promote and disguise survivalism. The problem for education however extends far deeper than the inequity in Federal government funding. Whilst this is a major problem, critical scrutiny must also focus on what states can do to turn back aspects of their own education policy that work to exacerbate and entrench social disadvantage.

Racial/ethnic variations in violence against women : Urban, suburban and rural differences

A large literature shows that violence against women in intimate relationships varies across racial/ethnic groups. However, it is unclear whether such variations differ across urban, suburban, and rural areas. The main objective of this article is to examine this issue using 1992 to 2009 National Crime Victimization Survey data. We also test the hypothesis that racial/ethnic minority women living in rural areas are more likely to be assaulted by their current and former intimate partners than are their urban and suburban counterparts. Contrary to expectations, results indicated virtually no differences in the rates at which urban, suburban, and rural racial/ethnic minority females were victims of intimate violence. The results indicate the great need of additional research into this important topic.

Crime, justice, and inequality : Oh Canada, where art thou?

Since Canada’s colonial beginnings, it has become increasingly riddled with classism, racism,sexism, and other damaging outcomes of structured social inequality. In 2006, however,many types of social injustice were turbo‐charged under the federal leadership of the Harper government. For example, a recent southern Ontario study shows that less than half of working people between the ages of 25 and 65 have full‐time jobs with benefits. The main objective of this paper is to critique the dominant Canadian political economic order and the pain and suffering it has caused for millions of people. Informed by left realism and other progressive ways of knowing, I also suggest some ways of turning the tide.

PAC-Bayes-empirical-Bernstein inequality

We present PAC-Bayes-Empirical-Bernstein inequality. The inequality is based on combination of PAC-Bayesian bounding technique with Empirical Bernstein bound. It allows to take advantage of small empirical variance and is especially useful in regression. We show that when the empirical variance is significantly smaller than the empirical loss PAC-Bayes-Empirical-Bernstein inequality is significantly tighter than PAC-Bayes-kl inequality of Seeger (2002) and otherwise it is comparable. PAC-Bayes-Empirical-Bernstein inequality is an interesting example of application of PAC-Bayesian bounding technique to self-bounding functions. We provide empirical comparison of PAC-Bayes-Empirical-Bernstein inequality with PAC-Bayes-kl inequality on a synthetic example and several UCI datasets.

Racial differences in physical activity among breast cancer survivors : implications for breast cancer care

Background: Physical activity after breast cancer diagnosis is associated with improved survival. This study examines levels of and changes in physical activity following breast cancer diagnosis, overall and by race. Methods: The Carolina Breast Cancer Study, Phase III, assessed pre- and post-diagnosis physical activity levels in a cohort of 1,735 women, aged 20-74, diagnosed with invasive breast cancer between 2008 and 2011 in 44 counties of North Carolina. Logistic regression and analysis of variance were used to examine whether demographic, behavioral and clinical characteristics were associated with activity levels. Results: Only 35% of breast cancer survivors met current physical activity guidelines post-diagnosis. A decrease in activity following diagnosis was reported by 59% of patients, with the average study participant reducing their activity by 230 minutes (95% CI: 190, 270). Following adjustment for potential confounders, when compared to white women, African-American women were less likely to meet national physical activity guidelines post-diagnosis (odds ratio: 1.38, 95% CI: 1.01, 1.88), reported less weekly post-diagnosis physical activity (182 vs. 215 minutes; p=0.13), and reported higher average reductions in pre- versus post-diagnosis weekly activity (262 vs. 230 minutes; p-value = 0.13). Conclusion: Despite compelling evidence demonstrating the benefits of physical activity post-breast cancer, it is clear that more work needs to be done to promote physical activity in breast cancer patients, especially among African-American women.

The educational pipeline for health care professionals : understanding the source of racial differences

The underrepresentation of blacks in the healthcare professions may have direct implications for the health outcomes of minority patients, underscoring the importance of understanding movement through the educational pipeline into professional healthcare careers by race. We jointly model individuals' postsecondary decisions including enrollment, college type, degree completion, and choosing a healthcare occupation requiring an advanced degree. We estimate the parameters of the model with maximum likelihood using data from the NLS-72. Our results emphasize the importance of pre-collegiate factors and of jointly examining the full chain of educational decisions in understanding the sources of racial disparities in professional healthcare occupations.

A behavioural economics inquiry into inequality in education: Three empirical essays

This thesis investigates behavioural processes for inequality in education and solutions to mitigate such effects, applying conceptual and methodological insights from behavioural and experimental economics. It explores relative age differences in economic preferences of young individuals, the influence of stereotypes and positive discrimination on performance, and evaluates a program that offers strong encouragement for educational achievement of indigenous high school students.

Economic inequality of the badli workers of Bangladesh: Contested entitlements and a 'perpetually temporary' life-world

This article discusses the experience of economic inequality of badli workers in the state-owned jute mills of the postcolonial state of Bangladesh, and how this inequality is constituted and perpetuated. Nominally appointed to fill posts during the temporary absence of permanent workers, the reality of badli workers’ employment is very different. They define themselves as ‘a different category of workers’, with limited economic entitlements. We undertake content analysis of the badli workers’ narratives to identify elements that they themselves consider constitute these economic entitlements. We consider their perceptions of discrimination and exclusion and explain how, in response to these feelings, they construct their survival strategy. From this, through the writings of Armatya Sen, we discuss the badli workers’ contextual experience and understanding of economic inequality in relation to extant theoretical understandings, seeking to contribute to the field and to empirical studies in the subaltern context.